A Glance at General Mills Stock Ahead of Earnings

GIS options traders have been much more bearish than usual

Assistant Editor
Sep 21, 2021 at 2:05 PM
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General Mills Inc (NYSE:GIS) is gearing up for third-quarter earnings, due out before the open tomorrow, Sept. 22. The stock will be looking to walk away from the report with a rare upside move; GIS has finished only three of the past eight post-earnings sessions with gains, including a 1.5% move higher this past June. For tomorrow, the options market is pricing in a 3% post-earnings move for the stock, outpacing the average post-earnings swing of 1.9% in the last two years.

Ahead of the event, Morgan Stanley downgraded GIS to "underweight" from "equal weight," while trimming its price target to $51 from $57. The analyst in coverage cited "the highest commodity/input cost inflation in over a decade," and voiced concerns that the company will lag in organic sales growth relative to its sector. Before this adjustment, five of the eight analysts in coverage carried "hold" ratings on the stock, with three a "strong buy." 

On the charts, General Mills stock has been chopping lower since a May 13 annual high of $64.65, with its 80-day moving average capping breakouts since mid-June. Today, the equity is down 1.5% to trade at $57.85 at last check, as it grapples with its year-to-date breakeven. 

GIS 0921

Meanwhile, the options pits have been much more bearish than usual. This is per the security's 10-day put/call volume ratio of 1.61 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which stands higher than 90% of readings from the past 12 months.

It's also worth noting that GIS ranks low on the Schaeffer's Volatility Scorecard (SVS), with a score of just 12 out of 100. In other words, the security has consistently realized lower volatility than the options pits have priced in, making a premium-selling strategy a prudent move at the time. 

 

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