Earnings on Deck: Twitter Inc, Cliffs Natural Resources Inc, and Freeport-McMoRan Inc

TWTR, CLF, and FCX will report quarterly earnings this week

Karee Venema
Oct 27, 2014 at 11:26 AM
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It's poised to be another busy week on the earnings front, with Dow component Merck & Co., Inc. (NYSE:MRK) kicking things off this morning with a bottom-line beat. Looking ahead, microblogging site Twitter Inc (NYSE:TWTR), as well as mining issues Cliffs Natural Resources Inc (NYSE:CLF) and Freeport-McMoRan Inc (NYSE:FCX) are slated to tell all in the earnings confessional this week.

  • TWTR will unveil its third-quarter results after tonight's close, with Wall Street calling for a per-share profit of one penny. On the charts, the stock has made significant progress since bottoming out at an all-time low of $29.51 in early May, with the shares up 68% to trade at $49.49. Given Twitter Inc's history of volatile post-earnings price action -- the stock jumped 20% in the session subsequent to reporting in July, and plunged 24.2% the day after revealing its results in February -- the options market is pricing in a roughly 13% move. It seems most option traders, meanwhile, are expecting this action to resolve to the upside. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open 2.21 calls for every put over the past two weeks.

  • When CLF steps into the earnings spotlight tonight, analysts are expecting the company to post a third-quarter loss of 4 cents per share. Technically speaking, it's been a terrible year for the stock, which has shed 64% to churn near $9.45. More recently, the equity has underperformed the broader S&P 500 Index (SPX) by more than 45 percentage points during the past three months. If history is any guide, CLF could be poised to extend this deficit tomorrow, with the stock averaging a single-session post-earnings loss of 3.5% over the past two quarters. While another poorly received report could disappoint last week's optimistic option trader, it would come as music to the ears of short sellers. At present, 43.8% of the stock's float is sold short, and would take nearly six sessions to cover, at Cliffs Natural Resources Inc's average daily pace of trading.

  • FCX will take its place on the earnings stage ahead of tomorrow's open, and the consensus estimate is for a third-quarter profit of 61 cents. It's been a tough stretch for FCX, as well, with the shares off almost 23% from their July 10 annual high of $39.32, and down 1.6% today on reports of a planned mine strike in Indonesia. While the stock's 10-day ISE/CBOE/PHLX put/call volume ratio of 0.75 ranks in the bearishly skewed 86th percentile of its annual range, sentiment outside of the options pits is upbeat. Short interest, for example, accounts for a low 2% of the security's available float. Elsewhere, 80% of covering analysts maintain a "buy" or "strong buy" recommendation, with not a single "sell" to be found. Plus, the average 12-month price target of $41.20 stands at a 35.5% premium to the stock's current perch at $30.42, and in territory not charted by Freeport-McMoRan Inc in two years.

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