NIKE Inc. (NKE)

Update 12/22/2017: NKE’s earnings eat the Street estimate by 2.3%, coming in at $0.46 per share against the consensus forecast of $0.4372. Shares fell $4.71 in extended hours trading and then recovered by $2.67, falling into a narrow sideways movement. I exited for a loss.

Shares fell by 2.8% over my holding period of less than a day, or a -1,034% annual rate. The options position produced a -10.8% loss for a -3,931% annual rate.

Going into the trade the Zacks earnings surprise predictor shows a 1.21% score in the context of a neutral rank (3), accurately anticipating the actual report.

The trend metrics, however, were less successful. The average directional indicator (ADX) at 43.63 suggested a strong trend, and the directional indicators, with +DI at 29.27 and -DI at 13.55, showed it as an uptrend, missing the decline that actually ensued.

I shall complete this report with the daily movement vs. the expected movements after the number are available.

---

NKE publishes earnings on Thursday after the closing bell.

I shall use options that trade for the last time eight days hence, on Dec. 29.

Implied volatility stands at 31%, which is 3.3 times the VIX, a measure of the volatility of the S&P 500 index.

NKE’s IV stands in the 96th percentile of its annual range and at the peak of its most recent broad movement.

Read More »

 

12/21 – 3:25 p.m. New York time

I placed both an options and shares position on NKE timed to coincide with an earnings announcement. See NKE Analysis and Shares: NKE.

I exited options positions on  BBBY and KMX and shares positions on  ACN and FINL, and also on WGO.

Read More »

I have entered earnings plays using shares on ACN and FINL.  Each publishes earnings on Thursday before the opening bell.

ACN rose more than $6 after beatings the Street’s earnings forecast.

FINL rose more than a dollar after beating earnings expectations, although both the consensus estimate and the results were losses

sym	entry	exit	result ($)	result (%)	entry date	exit date
ACN	152.20	156.08	3.88	2.6%	12/20	12/21
	zacks rank	zacks esp	DI spread	ADX	earns est.	earns actual
	2	0.56	12.77	36.63	1.66	1.79
sym	entry	exit	result ($)	result (%)	entry date	exit date
FINL	11.77	12.86	1.09	9.3%	12/20	12/21
	zacks rank	zacks esp	DI spread	ADX	earns est.	earns actual
	3	1.36	12.77	37.3	-0.37	-0.26

By Tim Bovee, Portland, Oregon, Dec. 20, 2017

Read More »

CarMax Inc. (KMX)

Update 12/21/2017: KMX underperformed the Street estimate of its earnings by $3.1%, coming in at 81 cents per share compared to the consensus forecast of 83.56 cents per share. The price gyrated wildly in overnight trading, spiking up nearly $2 then undergoing two wide swings, ending up after the opening bell around $3 below the prior day’s close.

Shares declined by 2.7% during my holding period of less than a day, or a -988% annual rate. The options position produced a 366.9% return for a +133,833% annual rate.

The metrics performed as expected. 

The Zacks earnings surprise predictor (ESP) showed a negative surprise, which is what happened, in the context of a neutral (3) rank. The Zacks ESP has a poor record in forecasting negative earnings surprises and yet performed well in this instance.

The trend metrics showed a strong downtrend through a reversal of the directional indictators (+DI at 19.57 vs. -DI at 27.43), with the average directional index (ADX) at a powerful 30.6, indicating a strong trend. And indeed the price fell post-earns.

The movement from pre-earns close to post-earns close stayed within the average of the last four earnings announcement, dropping -2.47 compared to an average magnitude of 2.74.

At the extreme, the movement from pre-earns close to post-earns low came close to the estimate of $3.57, exceeding it by 9 cents, to -$3.66

There was strong consistency among the metrics used to assess this trade, and my takeaway is that I should reject trades that lack such consistency.

---

KMX publishes earnings on Thursday before the opening bell.

I shall use options that trade for the last time nine days hence, on Dec. 29.

Implied volatility stands at 33%, which is 3.4 times the VIX, a measure of the volatility of the S&P 500 index.

KMX’s IV stands in the 44th percentile of its annual range and the 77th percentile of its most recent broad movement.

Read More »

Bed Bath & Beyond Inc. (BBBY)

Update 12/21/2017: BBBY announced earnings of  $0.44 per hare, 13.6% higher than the analyst consensus forecast of $0.3874. The price spiked about $2.50 in overnight trading, quickly falling back by $2.50 and then after the opening bell, declined further, tracing a sideways pattern about $3 below the prior day’s close. I would have had a better result had I exited earlier at less than my goal of 25% of maximum potential profit.

Shares declined by 10.0% over my holding period of less than a day, or a -3,641% annual rate.The options position produced a -10.9% loss for a -3,977% annual rate.

BBBY had contradictions going into the trade, with a bearish Zacks rank of 4 but a 2.00 expectation of a positive earnings surprise. And both metrics performed as one would expect: There was a positive earnings surprise, and the price thereafter did fall.

The actual price move form the pre-earns close to the post-earns extreme was -3.44, or $1.21 beyond the expected price move. The best profit zone I could establish, $2.71, covered the expected move, but the hive mind of the market did the unexpected.

The post-earns moves metrics of the last four earnings announcements came closer to forecasting what actually happened. The average of the four events was a $3.50 movement, pre-earns close to post-earns close. The actual movement was  a decline of $3.06.

My takeaways are these:

• Don’t accept inconsistencies. If the earnings surprise predictor and the rank don’t match, pass on the the trade.
• If the historical post-earns moves differ sharply from the expected move based on options pricing, then require that the profit zone cover a certain percentage of the larger of the two spans, in both directions. What percentage? I don’t know yet, but I shall think on it between now and the advent of the post-holiday rush.

---

BBBY publishes earnings on Wednesday after the closing bell.

I shall use options that trade for the last time nine days hence, on Dec. 29.

Implied volatility stands at 56%, which is 5.8 times the VIX, a measure of the volatility of the S&P 500 index.

BBBY’s IV stands in the 75th percentile of its annual range and the 67th percentile of its most recent broad movement.

Read More »

Accenture plc (ACN)

ACN publishes earnings on Thursday before the opening bell.

I shall use options that trade for the last time nine days hence, on Dec. 29.

Implied volatility stands at 21%, which is 2.2 times the VIX, a measure of the volatility of the S&P 500 index.

ACN’s IV stands in the 49th percentile of its annual range and the 47th percentile of its most recent broad movement.

Read More »

12/20 – 10:35 p.m. New York time

I have updated the analyses of MU and RHT with results and an analysis of how well the metrics performed.

12/20 – 3:25 p.m. New York time

In Wednesday’s outcomes, I entered earnings plays using options on BBBY and KMX, and earnings plays using shares on ACN and FINL. I also analyzed ACN as an options position but declined to take the trade.

I exited MU and RHT, both options positions, but decided to continue holding the shares position on WGO.

Read More »

WGO publishes earnings on Wednesday before the opening bell.

WGO declined nearly $4 after beating the Street’s earnings estimates by 7 cents. I waited an additional day before exiting in order to give the price time to make a partial recovery from the fall, which indeed it did.

sym	entry	exit	result ($)	result (%)	entry date	exit date
WGO	57.99	56.81	-1.18	-2.0%	12/19	12/21
	zacks rank	zacks esp	DI spread	ADX	earns est.	earns actual
	3	0.00	13.6	32.8	0.50	0.57

By Tim Bovee, Portland, Oregon, Dec. 19, 2017

Read More »

Red Hat Inc. (RHT)

Update 12/20/2017: RHAT came in 1.46% below analysts’ earnings estimate, reporting $0.73 against a consensus of $0.74. After the announcement, shares fell $1.35 from the close in the first half hour of after-hours trading, then recovered $5.14 of the fall before the opening bell. The first 7-1/2 hours after the bell saw a fall of $5.11. I exited early at 21.8% of maximum potential profit.

Shares declined by 3.4% over my holding period of less than a day, or a -1,223% annual rate. The options position produced a +27.9% return for a +10,177% annual rate.

I went into the trade with Zacks showing a bullish rank (2) with the earnings surprise predictor at a -0.10% score, suggesting a small chance of a negative surprise. The trend metrics showed little or no trend but with an upward bias. The average directional index (ADX) stood at 24.35 going into the trade, the positive direction index (+DI) at 27.74 and the negative (-DI) at 21.26.

Those Zacks and trend metrics were all in line with what actually occurred with earnings, but not the post-announcement price movements.

The estimated move, based on options pricing, was $7.69. The actual movement from the pre-announcement close to the post-announcement low was a decline of $8.85, which moved beyond the $7.57 downside profit zone.

The movement form the pre-earns close to the close on the first trading day after the announcement was -$6.86, within the average and maximum of the four prior earnings announcements, but a bit larger than the central tendency.

---

RHT publishes earnings on Tuesday after the closing bell.

I shall use options that trade for the last time 10 days hence, on Dec. 29.

Implied volatility stands at 38%, which is 3.8 times the VIX, a measure of the volatility of the S&P 500 index.

RHT’s IV stands in the 80th percentile of its annual range and the 82nd percentile of its most recent broad movement.

Read More »

Micron Technology Inc. (MU)

Update 12/20/2017: MU beat the Street’s earnings estimate by 8.5%, coming in at $2.45 after estimates of $2.26. Shares rose by $3.24 in overnight trading, then fell $1.78 in the first 80 minutes after the opening bell. I exited early for 15.0% of maximum potential profit.

Shares rose by 5.5% over the holding period of less than a day, or a +1,993% annual rate. The options position produced an 18.9% return for a +6,909% annual rate.

I entered the trades with Zacks report a bullish rank (2) with an earnings surprise predictor score of 0.23%, anticipating a small chance of a positive earnings surprise. Both metrics successfully indicated a bullish bias but failed to anticipate the magnitude of the surprise. 

The average direction index stood at 23.35, with the positive directional index (+DI) at 26.03 and the negative (-DI) at 24.49, together indicating a weak upward or sideways trend. The metrics suggest the market failed to anticipate MU’s actual performance.

The estimated price move, based on options pricing, was $3.38. The actual move reached a high of $2.82 above the pre-earns close, staying within the $3.33 upside profit zone.

The price rose $1.77 pre-earns close to the close of the first trading session after earnings, below the $2.27 average, $2.92 maximum and $2.29 central tendency of the four prior earnings announcements.

---

MU publishes earnings on Tuesday after the closing bell.

I shall use options that trade for the last time 10 days hence, on Dec. 29.

Implied volatility stands at 54%, which is 5.4 times the VIX, a measure of the volatility of the S&P 500 index.

MU’s IV stands in the 41st percentile of its annual range — a result of a spike last June — and the 81st percentile of its most recent broad movement.

Read More »