Earnings Preview: Pier 1, Constellation, Walgreens

Analyzing recent option activity on Pier 1 Imports Inc (PIR), Constellation Brands, Inc. (STZ), and Walgreens Boots Alliance Inc (WBA)

Apr 8, 2015 at 12:00 PM
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Among the stocks gearing up to report earnings are home furnishing specialist Pier 1 Imports Inc (NYSE:PIR), wine purveyor Constellation Brands, Inc. (NYSE:STZ), and pharmacy chain Walgreens Boots Alliance Inc (NASDAQ:WBA). Additionally, Alcoa Inc (NYSE:AA) will step into the earnings spotlight tonight, signifying the unofficial kickoff to earnings season. Below, we'll gauge the pre-earnings temperature of PIR, STZ, and WBA.

  • PIR has been a technical underperformer, with the shares down 18.5% year-to-date to hover around $12.55, including a 1% dip today. Accordingly, options traders have been picking up Pier 1 Imports Inc puts at a faster-than-usual clip ahead of tonight's earnings release. Over the past 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), 1.35 PIR puts have been bought to open for every call, which is a higher ratio than 76% of all similar readings taken over the past year. Traders anticipating post-earnings downside have history on their side -- in the session immediately following its last eight earnings reports, PIR has lost an average of 4.5%, including an 18.5% drop in September. Near-term option buyers are paying a pretty penny to bet on the stock, as PIR's Schaeffer's Volatility Index (SVI) of 77% is at an annual high

  • On the other hand, STZ has been a technical juggernaut, with the shares up 48% year-over-year to hit $119.32. What's more, the shares of Constellation Brands, Inc. just hit a record high of $120.24 on Monday. Not surprisingly, traders have favored calls over puts heading into tomorrow morning's turn in the earnings confessional, as STZ's 10-day ISE/CBOE/PHLX call/put volume ratio of 2.60 stands in the 80th percentile of its annual range. Looking elsewhere, in the session immediately following its last eight earnings reports, STZ has gained an average of 1.8%. Traders are paying relatively inflated prices for their short-term bets on the stock, as its SVI of 40% is higher than 78% of all equivalent readings taken over the past year.

  • Mizuho Securities raised its price target on WBA to $86 from $72 this morning, sending the shares 0.9% higher to $88.10 -- spitting distance from their all-time high of $88.81, notched March 20. The hike is in line with Walgreens Boots Alliance Inc's recent price action, as the shares have advanced 34.5% year-over-year. In the options pits, call buying has reached fever pitch ahead of the company's earnings release tomorrow morning; WBA's 50-day ISE/CBOE/PHLX call/put volume ratio of 4.18 is the highest such reading taken over the past 12 months. Meanwhile, in the session immediately following its last eight earnings reports, WBA has advanced an average of 0.7%. Short-term options for the equity are available for historically attractive prices, as its SVI of 39% sits in the 40th percentile of its annual range.
 

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