Earnings Preview: Herbalife Ltd., Vivus, Inc., and Fossil Group, Inc.

Taking the pre-earnings temperature of Herbalife Ltd. (HLF), VIVUS, Inc. (VVUS), and Fossil Group Inc (FOSL)

May 4, 2015 at 3:52 PM
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Three companies headed to the earnings confessional tomorrow night are nutritional supplements maker Herbalife Ltd. (NYSE:HLF), biotech concern VIVUS, Inc. (NASDAQ:VVUS), and watch maker Fossil Group Inc (NASDAQ:FOSL). Let's see how option players are placing their bets on HLF, VVUS, and FOSL.

  • HLF is up 1.3% at $42.16, even as familiar foe Bill Ackman reiterates that he's 100% confident the company's business is deteriorating. From a longer-term perspective, HLF is up roughly 12% year-to-date, but has run into a roadblock in the $45 region -- home to the stock's descending 50-week moving average. Historically, the stock has moved an average of 6.9% in the session subsequent to reporting, going back eight quarters. More recently, the security gapped lower after its last three earnings reports, averaging a loss of 15.1%. Still, option buyers are betting bullishly ahead of earnings, as the stock's 10-day call/put volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits at 1.03 -- higher than 73% of all other readings from the past year. Herbalife Ltd.'s near-term at-the-money (ATM) straddle is pricing in a 10% move, though speculators are paying just a bit more for their 5/8 42-strike puts than calls.
  • VVUS is trending higher along with most of its biotech peers, up 0.9% at $2.33. Still, the security remains more than 19% lower year-to-date, and just touched a 14-year low of $2.22 last week. Nevertheless, the equity sports a 10-day ISE/CBOE/PHLX call/put volume ratio of 14.36, which sits in the 69th percentile of its annual range. The stock has moved an average of 7.5% in the session after its last eight earnings releases, but its near-term ATM straddle is pricing in an 18.7% swing. Speculators are paying up for their short-term bets, too, as VIVUS, Inc.'s 30-day ATM implied volatility (IV) stands at 95% -- higher than all but 2% of readings over the past 12 months. 
  • FOSL is up 0.4% at $85.36, but remains 23% lower in 2015. A handful of analysts have lowered their full-year earnings estimates for FOSL recently, citing escalating competition from the new Apple Inc. (NASDAQ:AAPL) watch. On the flip side, Topeka Capital Markets today opined that "the shares have bottomed here, as investors have focused on the headwinds without much consideration for the tailwinds," including "growing strength at Skagen" and "momentum in its core Fossil brand." The stock has endured a single-session post-earnings price swing of 8.5%, on average, over the past eight quarters. The equity's near-term ATM straddle is pricing in a move of 9.5%. Near-term option players haven't been more call-heavy during the past year, as the stock's Schaeffer's put/call open interest ratio (SOIR) is docked at an annual low of 0.59. Meanwhile, Fossil Group Inc's 30-day ATM IV of 48.9% is higher than 97% of all other readings from the past year, and the stock's Schaeffer's Volatility Index (SVI) of 65% registers in the 79th percentile of its annual range -- both signs of relatively inflated short-term premiums.

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