Stocks surged in trading yesterday as tax reform details emerged with a press briefing scheduled for today to announce the
entire package. On top of that, many companies continued reporting upbeat earnings with several CEOs expressing optimism for
the remainder of 2017. In recent results, AT&T Inc. (NYSE: T) met earnings expectations, but revenues fell short; and Chipotle Mexican
Grill, Inc. (NYSE: CMG) had a big earnings beat with
better-than-expected same store sales growth as well. Next up for Q1, Ford Motor Company (NYSE: F), General Motors Company (NYSE: GM), Chevron Corporation (NYSE: CVX) and Exxon Mobil Corporation (NYSE: XOM) report.
Auto Industry Shakeup
The auto industry was getting a little more press lately due to Tesla Inc (NASDAQ: TSLA) surpassing the market cap of both F and GM to become the most valuable
automaker in the United States. TSLA’s market cap is currently just under $52 billion, compared to just under $46 billion for F and
just over $51 billion for GM. What makes those numbers surprising is the annual sales of these companies. Last year, F sold 6.7
million vehicles and GM sold 10 million whereas TSLA only sold 76,230 vehicles. The three companies are still dwarfed by
Toyota Motor Corp (ADR) (NYSE: TM) roughly $177
billion market cap.
In upcoming auto earnings this week, F reports before open tomorrow and GM reports before open on Friday. F has performed the
worst so far in 2017 out of the automakers. Its stock is down almost 9% year-to-date, or YTD, compared to just under a 6% increase
in the S&P 500 (SPX). GM is down just over 3% YTD. Many analysts have recently raised concerns that rising car-dealer
inventories, particularly for used cars, could pressure the industry in the future.
F is expected to earn $0.34 per share—half what the company reported in the first quarter last year—on revenue of $34.74
billion, according to consensus third-party analyst estimates. Revenues have topped expectations by $2 billion to $3 billion in the
last 5 quarters while earnings have generally been more in-line with analyst estimates.
The options market has priced in just under a 3% potential stock move in either direction around F’s earnings release, according
to the Market Maker Move indicator on the thinkorswim
platform. In short-term options trading at the April 28 weekly expiration, calls were active at the 11.5 strike price and puts
were active at the 10 and 11 strikes. The implied volatility sits at the 39th percentile.
Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price over
a set period of time. Put options represent the right, but not the obligation to sell the underlying security at a predetermined
price over a set period of time.
The next automaker reporting this week, GM, is expected to earn $1.45 per share, up $0.19 from Q1 2016, on revenue of $40.25
billion, according to consensus third-party analyst estimates.
The options market has priced in just under a 3% potential stock move in either direction around GM’s earnings release,
according to the Market Maker Move indicator. In short-term options trading at the April 28 weekly expiration, calls were active at
the 34 and 34.5 strike prices while puts were active at the 33 and 33.5 strikes. The implied volatility sits at the 41st
percentile. Since GM doesn’t report until Friday, this information will fluctuate as trading continues today and
tomorrow.
Chevron and ExxonMobil Earnings
Energy companies have been helped by oil prices stabilizing in the $50 range, but prices remain far from highs over the past 10
years. As a result of improving commodity prices, the energy sector in the SPX is expected to report the largest year-over-year
increase in earnings, according to FactSet. Despite some turnaround in the sector, there are still several industries in the sector
expected to post earnings declines with the largest coming from oil and gas drilling.
When CVX reports at 11:00AM this Friday, it’s expected to earn $0.86 per share on $32.86 billion in revenue, according to
consensus third-party analyst estimates. Earnings are up substantially compared to last year, when the company lost $0.39 per share
on revenue of $23.55 billion.
The options market has priced in just under a 1.7% potential stock move in either direction around CVX’s earnings release,
according to the Market Maker Move indicator. In short-term options trading at the April 28 weekly expiration, calls were active at
the 107, 108 and 110 strike prices while puts were active at the 103 strike. The implied volatility sat at the 39th percentile.
XOM reports before open this Friday with expectations for earnings of $0.85, up from $0.43 in Q1 2016, per share on $64.13
billion, according to consensus third-party analyst estimates.
For XOM, the options market has priced in about a 1.5% potential stock move in either direction around the earnings release,
according to the Market Maker Move indicator. In short-term options trading at the April 28 weekly expiration, calls were active at
the 82 and 83.5 strike prices while puts were active at the 103 strike. The implied volatility sits at the 41st percentile. Like
GM, since CVX and XOM don’t report until Friday, this data will fluctuate until then as trading continues.
If you follow the tech sector, tomorrow is a big day in earnings. Amazon.com, Inc. (NASDAQ: AMZN), Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG), Microsoft Corporation (NASDAQ: MSFT) and Intel Corporation (NASDAQ: INTC) all report after market close.
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