2 Auto Stocks Crashing on Earnings

Advance Auto Parts, Inc. (NYSE:AAP) and Monro Muffler Brake Inc (NASDAQ:MNRO) both missed on earnings, and their stocks are down sharply as a result

May 19, 2016 at 11:00 AM
facebook twitter linkedin


Car retailers Advance Auto Parts, Inc. (NYSE:AAP) and Monro Muffler Brake Inc (NASDAQ:MNRO) ​are getting trounced this morning, following lackluster earnings reports. Below, we'll take a closer look at the details, and examine how traders in the options pits and beyond may be reacting.

AAP was last seen down 2.4% at $141.45, and earlier hit an intraday low of $132.98 -- just a hair's breadth from its annual low of $131.59, notched in February. As mentioned previously, the stock's dive is largely due to disappointing first-quarter earnings -- with the retailer's per-share profit of $2.51 falling 9 cents short of the consensus estimate, and sales also missing the mark. Plus, AAP's chief financial officer resigned.

This ought to be a welcome development for options traders, who have grown bearish toward AAP in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock has racked up a 10-day put/call volume ratio of 2.97 -- with long puts roughly tripling calls. What's more, this ratio outstrips three-quarters of all others from the previous year.


The steep loss should be a boon to short sellers, too. While short interest has been on the decline lately, Advance Auto Part, Inc's short-interest ratio still stands at a relatively high 6.50 -- indicating it would take more than a week for these bears to cover their positions, at the stock's typical trading levels.

Even worse off is MRNO, which has dropped 7.1% at $62.20. Earlier, the shares came close to an annual low, falling as far south as $56.15. Sparking the sell-off, the muffler and brake specialist reported fiscal fourth-quarter earnings of 42 cents on $229 million in revenue, both coming up shy of the Street's consensus view. Plus, the retailer offered up a disappointing current-quarter and full-year forecast.

While shareholders lick their wounds, Monro Muffler Brake Inc short sellers should be in celebration mode -- though the stock is currently short-sale restricted, after earlier plunging as much as 16.2%, its worst intraday percentage fall in more than 17 years. After all, 10.5% of MNRO's float is sold short, translating to four weeks' worth of trading activity, at the stock's average trading volumes.

Sign up now for Schaeffer's Market Recap to get all the day's big stock movers, must-know technical levels, and top economic stories straight to your inbox.


A Schaeffer's exclusive!

The Expert's Guide

Access your FREE trading earnings guide for Q3 before it's too late!


  
 
Special Offers from Schaeffer's Trading Partners