Patriot Coal Corporation (NYSE: PCX, Stock Forum) will step into the earnings spotlight on Friday, April 23, according to Thomson Reuters. Ahead of the event, it appears the options arena is expecting a disappointing report from the coal concern, judging by the latest data from the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE).
During the past 10 sessions on the exchanges, PCX has racked up a put/call volume ratio of 1.47, in the 98th annual percentile. In other words, speculators on the ISE and CBOE have bought to open bearish bets over bullish at a faster clip only 2% of the time during the past year.
Further reflecting the growing affinity for PCX puts is the stock’s Schaeffer’s put/call open interest ratio (SOIR), which measures options slated to expire within three months. As a result of the escalating put activity of late, the equity’s SOIR has crept higher to a 52-week peak of 0.73, implying that short-term speculators haven’t been more pessimistically positioned toward PCX at any other time during the past 12 months.
In the same vein, it appears most of the brokerage bunch have also boarded the security’s bearish bandwagon. According to Zacks, PCX has earned only four “buy” or better recommendations, compared to nine lukewarm “hold” or worse ratings. Plus, Thomson Reuters pegs the consensus 12-month price target on the stock at only $22.13, representing a slight discount to PCX’s current share price.
However, when juxtaposed with the stock’s technical and fundamental backdrops, the widespread pessimism plaguing PCX seems somewhat unjustified. Since grazing the $5 level a year ago, the shares have skyrocketed more than 420% along double-barreled support from their 10-week and 20-week moving averages. In fact, the equity has even outshined the broader S&P 500 Index (SPX) by 16% during the past 60 sessions.
What’s more, historically speaking, Patriot Coal has reported a narrower-than-expected quarterly loss in three of the past four quarters, Thomson Reuters reports. Should the company once again exceed the Street’s earnings expectations, the abundance of bears could actually serve as a contrarian boon for the stock. A mass exodus of pessimists in the options pits, or a round of upgrades and/or price-target boosts, could help PCX continue its quest for new highs.
Disclosure: Andrea Kramer has no financial interest in any of the equities or products mentioned in this column.