Get The Ticker Tape delivered right to your inbox.

X

Tap into XOM and CVX Q1 Earnings

Print
April 27, 2016
Tap into XOM and CVX Q1 Earnings

The drop in crude oil prices in January to 12 year lows forced some giants in the oil patch to cut staff and capital spending, setting off alarms that earnings could be at risk. Those firms will come clean this week when they report Q1 earnings. We’ll look at two of the biggest, Exxon (XOM) and Chevron (CVX). Both deliver results ahead of the opening bell on Friday.

Exxon’s Extra Hit

Wall Street is expecting XOM to post its steepest profit and revenue declines since the oil bust began in 2014. But can the chemicals business help offset some of the drop in oil?

Analysts reporting to Thomson Reuters are looking for, on average, earnings per share to plummet 74% to $0.31, from $1.17 in the year-ago period. Revenues are projected to tumble too, by 33% to $45.3 billion from $67.6 billion last year.

Short-term options traders have priced in a potential 2% share price move in either direction around the earnings release, according to the Market Maker Move indicator on the thinkorswim® platform by TD Ameritrade.

Going into earnings, options activity has been seen in at-the-money calls on the 88 strike and buyers at the 84- and 85-strike puts. The implied volatility is in line with what we’ve seen generally this earnings season at the 20th percentile. (Please remember past performance is no guarantee of future results.)

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.

FIGURE 1: XOM’S TREK.

Since hitting a 2016 low in early February, XOM’s shares have marched higher by more than 17%. Chart source: thinkorswim® by TD Ameritrade. Data source: Standard & Poor’s. Not a recommendation. For illustrative purposes only. Past performance does not guarantee future results.

CVX Shifts Gears

CVX’s profits have traditionally been born of what the industry calls its upstream operations, or the exploration and extraction of oil. But when oil prices dropped, CVX’s earnings did too and last year were primarily gleaned from downstream operations, which are refineries that bring the oil closer to the consumer. After oil prices tanked earlier this year, so too did CVX’s revenues.

As a result, Thomson Reuters analysts are forecasting a $0.15 a share loss for the quarter, compared to a profit of $1.07 a share a year ago, which beat Wall Street’s expectations by $0.28. Not surprisingly, revenues are projected to dive too, down 38% to $21.4 billion.

Short-term options traders have priced in a potential 2% share price move in either direction around the earnings release, according to the Market Maker Move indicator.

Going into earnings, there’s been a lot of activity at the 100-strike puts and the 110-strike calls. The implied volatility is at the 25th percentile.

FIGURE 2: CVX TRACKING ABOVE $100.

Shares of CVX jumped nearly 30% since their January lows and are headed to levels not seen since July 2015. Chart source: thinkorswim® by TD Ameritrade. Data source: Standard & Poor’s. Not a recommendation. For illustrative purposes only. Past performance does not guarantee future results.

Ford’s Bet on Fleet

Ford (F) is set to report before the markets open Thursday and investors will get a chance to see how well its decision to focus more heavily on fleet sales, which are mostly sales to rental-car companies and generally at lower price points, has gone. Vehicle lease and loans account for some 71.5% of revenues.

Thomson Reuters analysts are pegging a per-share profit of $0.46, double last year’s profit of $0.23 a share. Revenues are expected to advance by 13% to $35.8 billion.

Short-term options traders have priced in a potential 3% share price move in either direction around the earnings release, according to the Market Maker Move indicator.

Going into earnings, most options trading activity has been around the money at 12.5-, 13- and 13.5-strike puts and 13.5- and 14-strike calls. The implied volatility is at the 32nd percentile.

FIGURE 3: F REVVING UP?

Shares of F have stalled throughout most of the year but got some power after bottoming in 2016 in early February. Since then, F shares have rallied better than 23%. Chart source: thinkorswim® by TD Ameritrade. Data source: Standard & Poor’s. Not a recommendation. For illustrative purposes only. Past performance does not guarantee future results.

A Check-Up on Bristol-Myers

Lots of FDA-approval news on Bristol-Myers Squibb (BMY) products in recent sessions has helped propel the stock but won’t likely be represented in the Q1 earnings when the pharma giant reports ahead of the market’s open on Thursday.

Analysts polled by Thomson Reuters, on average, are projecting a profit of $0.64 a share, below the year-ago quarter of $0.71. Top-line sales are expected to edge up to $4.24 billion from $4.0 billion a year ago.

Short-term options traders have priced in a potential 2.5% share price move in either direction around the earnings release, according to the Market Maker Move indicator.

BMY is not a stock heavy with options trading, and going into earnings, we’ve seen some activity in the at-the-money 71-strike calls and the 76-strike puts. The implied volatility is relatively low as well, at the 16th percentile.

FIGURE 4: BMY’S ROCKY ASCENT.

Shares of BMY have weathered many ups and downs in the last year. But since hitting a 2016 low in early February, BMY shares have managed to gain more than 20% in value, much of it this month. Chart source: thinkorswim® by TD Ameritrade. Data source: Standard & Poor’s. Not a recommendation. For illustrative purposes only. Past performance does not guarantee future results.

NC
Scroll to Top