Earnings Spotlight: Monsanto Company (MON) and Acuity Brands, Inc. (AYI)

Monsanto Company (MON) and Acuity Brands, Inc. (AYI) stepped up to the earnings plate

Apr 6, 2016 at 12:49 PM
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It's the slow part of earnings season, but several companies are still making headlines in the earnings confessional. Today, agricultural concern Monsanto Company (NYSE:MON) and lighting specialist Acuity Brands, Inc. (NYSE:AYI) are shaking things up, and one could enjoy tailwinds if the bears hit the bricks.

Traders are digesting MON's lower-than-predicted revenue for its fiscal second quarter, as the company struggles with sinking seed sales and a strong dollar. However, the stock is 0.8% higher at $86.80, after the firm lifted its full-year guidance to account for a change in the expected timing of restructuring expenses.

Heading into today's report, sentiment appeared to be skewed in MON's favor. Half of the analysts following MON offer up "strong buy" endorsements, and the average 12-month price target of $99.84 sits at a 15% premium to the stock's current value, and in territory not seen in 2016. Short interest on MON has been declining lately, too -- down 30% during the most recent one-month reporting period. In fact, these bearish bets now account for less than 2% of the equity's available float.

And in the option pits, traders had been purchasing long calls over puts at an accelerated rate, hinting at growing optimism ahead of earnings. MON'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 3.52 -- higher than 92% of all readings in the past year.

Technically, MON is off 13% year-to-date, pressured beneath resistance at its 160-day moving average -- a trendline the shares haven't topped on a closing basis since last May. Monsanto Company (NYSE:MON) seems to have found an ally in the $84 range, though, which contained pullbacks in September and March.

AYI bears might be sweating after this morning's strong earnings beat . The company reported record fiscal second-quarter earnings, and offered a rosy outlook --though the same can't be said for this sector peer. The news has the shares soaring 11.3% to $250.35. In fact, the stock earlier tapped a fresh all-time high of $253.97, breaking out atop former resistance in the $240 region.

The brokerage bunch has been in AYI's corner for some time, with 80% of analysts calling the equity a "strong buy" and not a single "sell" on the books. However, not everyone is so optimistic. Short interest on AYI rose by over 36% during the past month, and accounts for nearly seven sessions' worth of trading, at the security's average daily volume. That's plenty of fuel for a short squeeze.

And while option volume on AYI is relatively light, on an absolute basis, option traders have been betting heavily against the shares. At the ISE, CBOE, and PHLX, traders bought to open nearly five AYI puts for each call in the last two weeks -- a ratio in the 79th percentile of its annual range. An unwinding of bearish sentiment from option traders and short sellers could be enough to keep the rally going for Acuity Brands, Inc. (NYSE:AYI).

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