Today, we are analyzing historical moves on various companies reporting earnings in the 2nd week of December during the period between December 10, and December 14. For the companies investigated, we looked at the average movement one month prior to reported earnings and the average movement one month after reporting dates. For each company, we looked at these movements over the past 10 years* in the December earnings reporting period, giving us a fairly concise look at what they do historically over this set of time. The companies covered were FactSet Research Systems Inc. (FDS), Costco Wholesale Corporation (COST), Hovnanian Enterprises Inc. (HOV), Pier 1 Imports, Inc. (PIR), Winnebago Industries, Inc. (WGO), Adobe Systems Inc. (ADBE), Darden Restaurants, Inc. (DRI), Nordson Corporation (NDSN), VeriFone Systems, Inc (PAY), and Joy Global, Inc. (JOY).
At the end of the article, we have provided two trading ideas. We believe these ideas will allow you to use this information usefully.
Below you can find the average movement that these companies had one month prior to their December reporting date for the past 10 years.
(click to enlarge)
From the chart above, we can see that the period leading up to December earning reports has historically not been a good one for the majority of the companies covered in this research. Only 4 out of the 10 companies covered showed any gain, with the largest being Winnebago with average returns of 11.44% followed by Joy Global Inc. with gains of 7.70% and then Darden Restaurants with gains of 4.21%. Of these companies we like JOY and WGO for the period leading up to earnings because their prices have been flat for the last couple of weeks so we can expect an upside leading up to the reporting date.
Below you can find the average movement that these companies had one month after their December reporting date for the last 10 years.
As we can see from the data above, PAY and PIR are typically the best performers coming out of earnings reports in December with both of them having gains of above 6.5%. We did some further analysis on these two companies that ended up supporting our arguments with their earnings report coming up. With PIR, analyst estimates predict a growth in earnings of 14.29% and growth in revenue of 9.80% while in PAY these same analyst estimates predict a growth in earnings of 40.40% and a growth in revenue of 20.60%. As we can see from both companies, the predictions associated with their earnings reports are excellent.
Based on the above information, here are two trading ideas:
Trade #1: PAY, Jan21, 28/26 Bull Put Spread
Max Gain: 14%
Trade #2: PIR, Jan21, 18/17 Bull Put Spread
Max Gain: 18%
The Oxen Group
*Data collected for NDSN, JOY and PAY did not go back the regular 10 years as result of the lack of sources.