Earnings Season Highlights

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A collection of noteworthy post-earnings reactions
Published on Mar 28, 2019 at 10:30 AM
Updated on Mar 19, 2021 at 7:15 AM
  • The Week Ahead

The earnings calendar for next week is relatively quiet, save for releases from Dow component Walgreens Boots Alliance (WBA) and beer maker Constellation Brands (STZ). However, Friday's nonfarm payrolls report for March more than makes up for that, as Wall Street will continue to gauge the health of the U.S. economy amid fears of a slowdown.

Below is a brief list of some key market events scheduled for the upcoming week. All earnings dates listed below are tentative and subject to change. Please check with each company's respective website for official reporting dates.

The week will kick off on Monday, April 1, with the release of retail sales, the Markit's services purchasing managers manufacturing index (PMI), the Institute for Supply Management (ISM) manufacturing index, business inventories, and construction spending. Cal-Maine Foods (CALM) will report earnings.

Durable goods orders come out on Tuesday, April 2, and earnings will be heard from WBA, Dave & Busters (PLAY), and GameStop (GME).

The ISM non-manufacturing index comes out on Wednesday, April 3, along with the ADP employment report, and the weekly update on domestic crude inventories. There will also be speeches from Atlantic Fed President Raphael Bostic and Minneapolis Fed President Neel Kashkari. For earnings, Acuity Brands (AYI) and Signet Jewelers (SIG) will report.

For Thursday, April 4, the economic calendar has jobless claims and the Fed's balance sheet. Speeches from Cleveland Fed President Loretta Mester and New York Fed President John Williams will be heard, too. As for earnings, numbers will be released from STZ and Duluth Holdings (DLTH).

Then on Friday, April 5, the March jobs report will grab headlines early on, while later in the day Bostic will speak again. There are no notable earnings releases for the day.

 

Published on Mar 27, 2019 at 12:14 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Quantitative Analysis

Department store concern Kohl's Corporation (NYSE:KSS) have been on a slow rebound since a post-earnings bear gap in mid-November and subsequent bottoming out at eight-month lows on Dec. 21. The stock has managed to tack on 5.7% year-to-date, and even reclaim the aforementioned bear gap earlier this month. However, in the wake of its rally, the equity ran up to a historically bearish trendline, that could send the stock back down the charts. 

Drilling down, KSS just came within one standard deviation of its 200-day moving average -- a trendline that has served as a ceiling for the stock since its bear gap. This signal has flashed on the charts four other times in the past three years, according to data from Schaeffer's Senior Quantitative Analyst Rocky White. The stock has been lower one month later each time, averaging a 4.1% drop. From where it currently sits at $69.86, a similar move would kick the stock down to $67 -- right below the $68 level, which has acted as an area of support in recent months.   

KSS Chart March 27

Analysts are mixed on the stock, with six "strong buy" ratings, seven "hold" ratings, and one "strong sell," leaving the door wide open for a round of downgrades. What's more, the consensus 12-month target price of $76.31 represents a 8.7% premium to current levels, and stands in an area not seen since mid-November. 

Short sellers are already piling on KSS, with short interest up 13.7% in the last two reporting periods, representing a healthy 16.4% of the stock's available float, or roughly 8 days of trading at the equity's average daily volume. Echoing this pessimistic mentality, it looks like puts are being bought to open at a quicker clip than usual on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). The equity currently sports a 50-day put/call volume ratio that sits in the 84th percentile of its annual range. 

For traders who want to speculate on Kohls next leg down with options, the security's Schaeffer's Volatility Index (SVI) of 30% stands higher than just 8% of all other readings for the past year. This means that near-term options are pricing in relatively low volatility expectations right now. 

Published on Mar 27, 2019 at 1:11 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Indexes and ETFs
  • Best and Worst Stocks
  • Quantitative Analysis

We recently outlined the best and worst stocks to own in the month of April, historically. Today, we're taking a broader look to see which sectors tend to shine next month. Among the best exchange-traded funds (ETF) to own in April over the past 10 years has been the VanEck Vectors Gaming ETF (BJK), which boasts casino stocks like Las Vegas Sands (LVS) and Wynn Resorts (WYNN) among its top holdings.

Of all the ETFs we track, BJK has generated the biggest average April return of 5.3%, according to data from Schaeffer's Senior Quantitative Analyst Rocky White. Further, it's one of the few funds that have ended April in the black at least 80% of the time over the past decade.

ETF performance in April

The shares of BJK have added nearly 10% so far in 2019, but recently ran into a wall in the $38 region. This level has acted as a roadblock for the ETF since October, and also represents a 38.2% Fibonacci retracement of the fund's fall from its May highs to its Dec. 26 lows. Further, the formerly supportive 160-day moving average has descended into the area, and contained BJK's rally attempt in late February. At last check, the ETF was trading around $36.25. Another 5.3% bump from current levels would place the shares around $38.17, right around its February highs.

BJK ETF chart March 27

Although absolute options volume tends to run light on the gaming ETF, traders have been betting bullishly. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), BJK's 10-day call/put volume ratio stands at 5.50, indicating buyers have picked up more than five calls for every put on the fund in the past two weeks.

Short-term options on the ETF are attractively priced, too. Its Schaeffer's Volatility Index (SVI) of 16% is higher than just 28% of all other readings from the past year, suggesting near-term BJK options are underpricing volatility at the moment.

Published on Mar 27, 2019 at 1:37 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Quantitative Analysis

RH Inc (NYSE:RH) -- formerly known as Restoration Hardware -- will report quarterly earnings tomorrow, March 28. Ahead of the event, shares of the home goods retailer are flashing a historic buy signal on the charts.

RH stock has been sliding since its early March test of the $155-$160 region -- an area that's kept a lid on the equity's advances since June 2018. However, from a longer-term perspective, the shares are now back within one standard deviation of their 52-week moving average, after a lengthy stretch above this trendline.

Over the past 15 years, RH has endured a similar pullback seven other times, after which the equity was up an average of 8.12% a month later, per data from Schaeffer's Senior Quantitative Analyst Rocky White. Three months out, RH was higher by an impressive 28.94%, on average, and was in the black 86% of the time. From the stock's current perch of $128.51, similar one- and three-month rallies would put RH at $138.93 around the end of April, and at $165.70 -- in uncharted territory -- around the end of the second quarter.

RH stock chart March 27

What's more, RH shares are prone to big earnings reactions. The stock has averaged a one-day post-earnings swing of 20.8% over the past eight quarters, regardless of direction. Looking back six quarters, five of those reactions were to the upside, including a one-day surge of 22.5% after earnings last March.

Should the retail concern once again wow in the earnings confessional, a round of upbeat analyst attention could ensue. Currently, more than half of the analysts following RH maintain tepid "hold" ratings, leaving the door open for potential upgrades to lure more buyers to the table.

A short squeeze could also propel RH higher. Short interest represents more than 34% of the equity's total available float, or more than two weeks' worth of pent-up buying demand, at the stock's average pace of trading.
Published on Mar 27, 2019 at 2:12 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Analyst Update

Morgan Stanley chimed in on optical makers today. While the brokerage firm waxed optimistically on Lumentum (LITE), it struck a decidedly tone with Acacia Communications, Inc. (NASDAQ:ACIA). Specifically, the brokerage firm downgraded ACIA stock to "underweight" from "equal weight" on customer concentration risk next year, but boosted its price target to $44 from $38 -- noting upbeat expectations for 2019 financial results.

Most analysts are still bullish on Acacia Communications, with six of the nine in coverage maintaining a "strong buy" rating on the stock. However, the average 12-month price target of $54.42 is a discount to ACIA stock's current price, down 2.2% so far today to trade at $54.90.

Options traders, meanwhile, have bought to open calls over puts at a quicker-than-expected pace, albeit amid relatively low absolute volume. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), ACIA's 10-day call/put volume ratio of 9.77 ranks in the 90th annual percentile.

Some of this call buying could be at the hands of shorts hedging against any additional upside risk. Short interest on Acacia Communications rose 3.7% in the most recent reporting period to 1.84 million shares -- coming off an 18-month low in the Feb. 15 reporting period -- and now accounts for a healthy 5.5% of the equity's available float.

On the charts, ACIA shares bounced in late December right at $36 -- near their pre-bear gap highs from July. The stock is up 52% since then, and hit a nearly two-year high of $58.55 on March 21. Today's decline is finding support at the equity's 30-day moving average, while just below here is $52 -- a short-term floor following the security's Feb. 22 bull gap.

acia stock daily chart march 27

Published on Mar 27, 2019 at 2:57 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Analyst Update

Biotech concern Xencor Inc (NASDAQ:XNCR) is higher today, after Berenberg Capital Markets initiated coverage with a "buy" rating and a $45 price target, which represents an almost 50% premium to Tuesday's close at $31.54. The brokerage firm predicts a rebound for XNCR, and waxed optimistic on the company's Ultomiris and MOR-208 treatments. As a result, the stock is up 2.3% at $32.26 in afternoon trading.

From a longer-term perspective, though, XNCR has been in a channel of lower highs since hitting its all-time peak of $48.38 in mid-September. XNCR just bottomed out at a 10-month low on March 14, but has run into a wall around the $32- $33 level -- a former layer of support and now home to the stock's descending 50-day moving average.

XNCR Chart March 27

Despite XNCR's struggles, Berenberg is far from alone in the bulls' corner. Before today, the stock boasted six "strong buy" ratings, and only one "strong sell." Plus, the $42.75 consensus 12-month price target represents a 34% premium to current levels, and an area not charted by the stock since November. 

Should the analyst's prediction come to fruition, a short squeeze could be in the cards for Xencor. The 2.96 million shares sold short currently represent a healthy 6.5% of the stock's available float. At the equity's average daily trading volume, it would take a little under two weeks for short sellers to buy back all of these pessimistic positions. 

Published on Mar 27, 2019 at 3:20 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Earnings Preview

Drugstore name CVS Health Corp (NYSE:CVS) is lower with Centene (CNC) today, after the latter announced its plan to acquire WellCare Health (WCG) for an estimated $17.3 billion. CVS is also scheduled to appear before congress next week -- alongside major pharmaceutical names -- to discuss high prescription drug prices.

At last check, CVS Health stock is down 2.8% at $53.85 in afternoon trading -- and one of the worst performers on the New York Stock Exchange (NYSE). CVS has fallen 15% year-to-date, and is eerily close to its early March lows. This past week, the 20-day moving average has been pushing the shares even lower, and now put options traders have been flocking toward the drugstore chain. 

Digging deeper, puts are going at three times the expected pace, with more than 47,000 already crossing the tape today. The April 50 put is the most active, where 26,805 contracts have traded hands. In other terms, these traders may expect CVS stock to fall below $50 by or before its expiration on Thursday, April 18. Making this activity even more notable is the fact that call buying has by far been the more popular strategy in recent weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX).

Published on Mar 27, 2019 at 3:21 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Stocks On the Move

The Dow is declining today as Wall Street continues to focus on falling Treasury yields. Three stocks making big moves are weed concern Cronos Group Inc (NASDAQ:CRON), homebuilder Lennar Corporation (NYSE:LEN), and retailer Shoe Carnival, Inc. (NASDAQ:SCVL). Below, we'll take a closer look at the shares of CRON, LEN, and SCVL.

Analyst Sinks CRON Stock with "Sell" Rating

A few different analysts have weighed in on CRON stock since yesterday's close, but the note grabbing the most headlines is a downgrade to "sell" at Canaccord Genuity. The brokerage firm pointed out that the company's earnings release yesterday disappointed despite it being the first full period with recreational sales in Canada. PI Financial also cut its rating on Cronos Group, to "neutral" from "buy," though Cormark upped its price target to $25 from $17.

The shares of the weed issue were last seen down 9.9% at $18.26, set for just their second close below the 50-day moving average this year. Coming into 2019, the equity was trading just above $10, and topped out at $25.10 back in early February. Meanwhile in the options pits, more than 49,000 puts have traded today, compared to a daily average of 17,000, and new positions are opening at July 18 put, the most popular contract today.

Earnings, Housing Outlook Lift LEN Shares

LEN stock is headlining strong price action from homebuilders today, last seen trading up 4.6% at $51.98. Wall Street is responding to the company's fourth-quarter results, and upbeat comments about the housing sector, with CEO Rick Beckwitt saying, "We are optimistic that the housing market has found firm ground and is ready to move forward." Today's rise has Lennar pacing for its first close atop the 320-day moving average since July, and brings the stock's year-to-date lead to 32%.

Options traders were extremely bullish ahead of the event, evidenced by the 10-day call/put volume ratio of 7.01 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Not only does this show that seven calls were bought to open for every put, but it ranks in the 95th annual percentile, meaning such levels of call buying are rare.

SCVL Shocks Shorts with Q4 Report

An impressive fourth-quarter earnings release has SCVL stock trading up 22.6% at $37.38. This extends a stretch of huge post-earnings moves from the shares, which over the past two years have averaged a 14.1% swing after earnings. At the same time, today's gains still leave in place a series of lower highs since Shoe Carnival's August high of $45.

Short sellers, meanwhile, are getting crushed, as these bears control an incredible 56% of the total float. Going by average daily trading volumes, it would take shorts more than three weeks to cover their positions.

Published on Mar 27, 2019 at 9:31 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Unusual Trading Activity
  • Analyst Update

Square Inc (NYSE:SQ) is trading 1.1% higher this morning at $74.75, after Macquarie began coverage on the stock with an "outperform" rating and $94 price target. The brokerage firm said that the company makes accepting payments as simple as signing up for Netflix, making it easier for people to run their businesses. Despite a year-over-year lead of 38% from SQ, the majority of covering analysts have "hold" or worse ratings on the shares.

Looking closer at the charts, the security has struggled to move past the $75-$80 area since gapping below the level back in October. However, the rising 50-day moving average has caught up with the equity, and the 200-day moving average has been providing impressive support since January. For reference, Macquarie's $94 price target is below the stock's record high of $101.15 from Oct. 1.

square stock price

Meanwhile, data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) suggests that speculators have been betting on more upside for the shares. SQ's 10-day call/put volume ratio across the exchanges is 3.30, standing as an annual high. In other words, call buying has never been more popular relative to put buying in the past year.

Interestingly, the May 90 call saw the largest increase in open interest during the past two weeks, but data shows most of these contracts were sold to open. This tells us that some options traders see the $90 level as a technical ceiling for the stock in the weeks ahead.

As it stands now, the equity's Schaeffer's Volatility Index (SVI) of 41% ranks in the low 12th annual percentile, showing volatility expectations are muted at the moment, and it's seemingly better to be buying premium at the moment. Moreover, SQ's Schaeffer's Volatility Scorecard (SVS) is an elevated 94 out of a possible 100, revealing it's consistently made bigger moves over the past year compared to what the options market has priced in.

Published on Mar 27, 2019 at 10:02 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Buzz Stocks

Biopharmaceutical concern Axsome Therapeutics Inc (NASDAQ:AXSM) is hot today, on news the U.S. Food and Drug Administration (FDA) gave the company's AXS-05 major depressive disorder (MDD) treatment "breakthrough therapy" status. The designation was sparked by the treatment's successful Phase 2 ASCEND study results.

Now up 484.3% year-to-date, AXSM stock has been soaring since that positive drug data sent the shares up 161.2% on Jan. 7. While the equity briefly pulled back to its 40-day moving average in late February, it has since more than doubled. What's more, Axsome stock just hit a new all-time high of $16.80 earlier, last seen up 9.2% at $15.66. 

Analysts are resoundingly optimistic on ASXM. Currently, the stock holds three "strong buy" ratings. Plus, the consensus 12-month target price of $27 is at a 72.4% premium to current levels.

Short sellers, on the other hand, have ramped up their bearish exposure to the equity. Short interest rose 40.5% in the last two reporting periods, and now represents 15.2% of the stock's available float. It would take almost a week to buy back these pessimistic positions at AXSM's daily trading volume, leaving plenty of room for a short squeeze. 

 

 

 

Published on Mar 27, 2019 at 10:03 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Analyst Update

Wingstop Inc (NASDAQ:WING) stock is up 2.3% to trade at $73.43, responding positively to BMO initiating coverage on the restaurant chain with an "outperform" rating and $85 price target. The analyst spoke glowingly about the company, calling it a "unicorn" due to a "combination of long-tailed unit growth and superior operating/growth metrics." 

Wingstop stock nabbed a record high of $73.97 on March 22, and now boasts a 12-month gain of over 58%. During this time frame, pullbacks in August, December, and February were all contained by the shares' ascending 160-day moving average. 

A short squeeze is likely fueling this recent rally. Short interest fell by 2.6% in the most recent reporting period to 3.90 million shares. However, this accounts for a healthy 13% of WING's total available float, and more than a week's worth of pent-up buying power, at the security's average pace of trading.

Despite the equity's steady rise on the charts, analysts have been skeptical to come forward with bull notes, with five of the 11 brokerages covering WING rating it a "hold" or "sell." And while BMO's price target represents significant upside to the record high, the security's consensus 12-month price target of $70.17 is a 2% discount to last night's closing perch of $71.76. 

Although volume tends to run light, options traders should note that premiums are attractively priced at the moment. Specifically, WING's Schaeffer's Volatility Index (SVI) of 31% ranks in the 8th percentile of its annual range. In other words, near-term options are pricing in relatively low volatility expectations.

Published on Mar 27, 2019 at 10:37 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Intraday Option Activity

The shares of Centene Corp (NYSE:CNC) are spiraling, after the U.S. health insurer said it was buying rival WellCare Health Plans (WCG) in a cash-and-stock deal valued at $17.3 billion, including debt. The purchase is expected to boost CNC's Medicaid division, as well as its exposure to the Medicare Advantage market, and comes amid a renewed effort from the Trump administration to repeal Obamacare.

At last check, CNC shares were down 7.4% at $50.80, on track for their fourth straight loss. The stock is down 12.1% year-to-date, but the round $50 level appears to be emerging as support, though, a region that marks Centene's early 2018 lows.

Options traders have been quick to react, with roughly 18,000 calls and 3,507 puts on the tape -- 20 times what's typically seen at this point, and total options volume already at a new 52-week peak.

Most active is the April 55 call, where it looks like speculators could be selling to open the options. If this is the case, they're setting a short-term ceiling for CNC stock. Traders could also be anticipating a volatility crush. Short-term volatility expectations have spiked today, per Centene's 30-day at-the-money implied volatility of 37.1% -- in the 96th percentile of its annual range.

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