Today, we are taking a look at some earnings analysis on how companies move into and out of earnings historically. For the companies investigated, we have looked at their moves from one month prior to earnings date to five days before earnings date (which is July options expiration). We have looked at their average move from one month prior to report date, and we have looked at one month prior to earnings date to 22 days after report date (which is August options expiration. For each company, we have looked at these spans over the past ten reporting dates, which gives us a fairly solid look at them. The companies we covered are Halliburton (HAL), Netflix (NFLX), McDonald's (MCD), Ashland (ASH), EMC (EMC), Under Armour (UA), UPS (UPS), Apple (AAPL), Broadcom (BRCM), Buffalo Wild Wings (BWLD), Panera (PNRA), and Riverbed (RVBD).
Here is the one month prior to earnings to five days prior to earnings chart:
Based on this data, we can see that the three top performers from this time frame are Ashland , Netflix , and Under Armour . Of those three, the one that we like the best is Ashland. The company is very consistent around earnings due to their high growth currently and stellar value. They are expecting to see over 90% growth in EPS YoY in the coming quarter, and they have only declined once in the past ten periods at 8%. NFLX and UA scare us because of high beta and volatility. Additionally, NFLX has been weak in the past few reporting quarters and UA is extremely high in value right now. The two weakest interestingly are food-related with McDonald's and Panera .
Here is the one month prior to earnings to earnings date data:
Once again, ASH leads this group, while MCD is the weakest. For this information, we like to look at it as which companies makes the biggest jump in the week before earnings. Panera and EMC are the ones that move most swiftly into earnings the last few days. Panera has been strong in growth, but the stock seems to not often move like a growth stock. Its looking at another solid quarter with EPS growing about 25%. EMC is seeing pretty flat growth.
The final data we investigated was how these companies due one month out to 22 days after report, which in our current time frame will take us to August expirations date. Here was what we found:
Once again, Ashland performs well with Netflix leading the way overall. NFLX has had some amazing post-earnings jumps, but they have such strong max drawdowns on weak quarters that it makes it tough to play them. Apple is very consistently near the top, and we like them again this quarter. Their max drawdown in this period was 8.5%, which means that they are once again a strong candidate to sell some puts against or place bull put spread on. Panera was strong again as well. Broadcom showed a lot of weakness, and if you are looking for a bearish position in earnings season, they look good for that. They are looking at earnings contraction YoY actually.
Here are a few trades we would look to place:
- Trade #1: Long ASH, Short MCD
- Trade #2: EMC, Sell $24 Puts, Jul21
- Trade #2: ASH, Sell $65 Puts, Jul21
- Trade #4: AAPL, 530/525 Bull Put Spread, Aug18
I am long PNRA.