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Earnings Preview: AT&T, Ford and Boeing Take The Stage This Week

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July 25, 2017
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iStockphoto.com/JimFeng

It’s another busy day for upcoming earnings with three more major companies releasing Q2 results. After market close today, telecom giant AT&T (T) reports, and tomorrow morning we’ll see results from Ford (F) and Boeing’s (BA) second quarter as well.

AT&T Earnings and Trading Activity

AT&T is in the process of its $85 billion acquisition of Time Warner Cable (TWX), which was announced in October last year, and is expected to close by the end of the year pending regulatory approval, according to management. In a press release, the company said the combined company would provide “premium content with the networks to deliver it to every screen, however customers want it.”

AT&T management has said it expects the deal to be accretive in the first year after the transaction closes on an adjusted earnings per share and free cash flow per share basis. They also expect the deal to support the company’s dividend coverage, which currently has a yield of 5%.

When AT&T releases results today, it is expected to report earnings of $0.74 per share on revenue of $39.8 billion, according to third-party consensus analyst estimates. Earnings are expected to increase two cents while revenues are projected to decrease 1.8% compared to the same period a year ago. 

The stock has steadily declined so far in 2017 to a 52-week low of $35.81 on July 19. Options traders have priced in about a 2.3% potential share price move in either direction around the earnings release, according to the Market Maker Move indicator on the thinkorswim® platform.

In short-term options trading leading up to the earnings release at the July 28 expiration, calls have been active at the 36 and 36.5 strike prices while puts have been active at the 35.5 and 36 strikes. The implied volatility sits at the 58th 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.

AT&T stock ytd performance charted on thinkorswim platform

FIGURE 1: UNDERPERFORMING IN 2017.

AT&T (T) has declined almost 16% year-to-date and has underperformed the S&P 500 by a wide margin so far this year. 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 Earnings and Trading Activity

This will be Ford’s first quarterly report with new CEO Jim Hackett at the helm. With a new CEO, analysts often look for additional details on earnings calls about the future direction they are planning on taking the company. Hackett takes over amid a challenging market for U.S. automakers as auto sales and lending have slowed down in the United States.

For Ford’s second quarter, it is expected to report earnings of $0.44 per share, down from $0.52 in Q2 2016, on revenue of $37.95 billion, according to third-party consensus analyst estimates. That revenue estimate is the highest it has been for Ford in the past eight quarters.

The stock started the year at a high of $13.27 and, after a large drop in March, has been bouncing up and down for the past several months. The stock opened at $11.30 today and options traders have priced in around a 3% potential share price move in either direction around the earnings release, according to the Market Maker Move indicator.

In short-term trading leading up to the earnings release at the July 28 expiration, calls have been active at the 11.5  and 12 strike prices and puts have been active at the 11 and 11.5 strikes. As of this morning, the implied volatility is at the 49th percentile. 

Ford (F) stock YTD performance charted on thinkorswim platform

FIGURE 2: A STEADY DECLINE FOR FORD.

Ford (F) started the year at a high of $13.27 and has steadily declined since then. So far this year, the stock is down 10.17% year-to-date compared to the S&P 500’s (SPX) 9.7% increase. 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.

Boeing Earnings and Trading Activity

As its commercial airplane business has slumped in recent quarters, Boeing management has emphasized its focus on services and its defense-related products, which they  expect to grow under an increased Department of Defense budget.

In recent news, the Wall Street Journal reported that the company had cut more than 6,000 jobs during the first half of the year. The layoffs are part of cost-cutting initiatives management had announced, which also includes an emphasis on reducing supply chain costs.

For Boeing’s second quarter, the company is expected to report earnings of $2.31 per share on revenue of $22.97 billion, according to third-party consensus analyst estimates. Compared to the same period a year ago, revenue is forecasted to decline 7.2%, while the company had an unusual earnings period last quarter due to billions of dollars in write-downs related to some of its airplanes.

Options traders have priced in around a 2.5% potential share price move in either direction around the earnings release, according to the Market Maker Move indicator. In short-term trading leading up to the earnings release at the July 28 expiration, calls have been active at the 215 strike prices while puts have been active across a number of strikes. As of this morning, the implied volatility is at the 49th percentile. 

Boeing (BA) company profile shown on thinkorswim platform

FIGURE 3: BOEING COMPANY PROFILE.

Boeing is widely known for its commercial airplanes, but the company also generates a significant amount of revenue from the Department of Defense. The Company Profile tool on the Fundamentals tab on the thinkorswim® platform allows TD Ameritrade clients to analyze potential revenue drivers of a stock. Trefis information and estimates used in Company Profile are provided by Insight Guru, a separate and unaffiliated firm. Not a recommendation. For illustrative purposes only. Past performance does not guarantee future results.

Looking Ahead

The Fed kicks off its July meeting today and we also have the first estimates for second quarter GDP coming out on Friday with forecasts calling for around 2.8% growth, according to Briefing.com consensus estimates. That would be a significant improvement over last quarter’s 1.4% growth. With high expectations for GDP, we could see some more volatility if the results fall short.

Good Trading,
JJ
@TDAJJKinahan

NC
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