Today, we take a look at five companies reporting earnings at the end of the week. These companies include: Clorox Company (CLX), Digital River, Inc. (DRIV), Novellus Systems, Inc. (NVLS), Sunoco, Inc. (SUN) and Vertex Pharmaceutical Inc. (VRTX). In our analysis, we focus on the movements each of these stocks have made historically after reporting earnings this quarter over the past 10 years as well as the movements each company makes between February 1st and each February options expiration since 2002.
The first chart depicts the movements that these companies have experienced over the past 10 Feburarys, from February 1st through the corresponding options expiration.
- The most consistent stock over this period is CLX, experiencing gains 80% of the time for an average gain of 2.95%, with maximum gains upwards of 9%.
- SUN has also seen gains 80% of the time over this period but has experienced losses of -21% and -16% the two times they missed.
- Each of the other three companies have only seen gains 50% of the time with max losses well outweighing max gains.
The next two charts depict the movements seen the day after earnings release (or day of if released BMO) as well as the week after earnings releases over the past 10 years. (Quarter 2 for CLX, Quarter 4 for each of the other four companies).
- The most consistent company is again CLX, experiencing gains 70% of the time after reporting Q2 earnings since 2002 in both the day after and week after reporting.
- VRTX has the largest average gains one week after reporting earnings after seeing 22% gains one week after earnings back in 2002.
- The least consistent company is SUN, rallying only 40% of the time one day after earnings and 50% of the time one week after earnings, for -1.35% and -2.53% average losses, respectively.
How can we use this information to form a trade?
- With CLX being the most consistent company, with positive gains during all three periods, we would like to go long CLX, with a target of a 2% gain for the first half to 69.75.
