2015-01-12 Pre-Earnings Analysis (AA) (KBH)

Posted on January 12th, by Mitchell Warren in Free Articles, Options Risk Management, Unusual Options Activity. Comments Off on 2015-01-12 Pre-Earnings Analysis (AA) (KBH)

Pre-Earnings Analysis

  1. AA- Alcoa reports Q4 earnings after the bell tonight. Wall Street analysts are looking for $0.27 per share on revenue of $6.04B (only missed EPS estimates once in the last three years). The options market is pricing in a $0.88 move, or 5.45%, in either direction this week. Shares have rallied after earnings on 2 out of the last 3 reports, but that average is evened out when looking at the last two years of reports. The biggest option trade of the day was a buyer of 27,000 Jan 17 $14 puts for $0.04 (likely a closing of an existing position). Today, Nomura upgraded the stock to buy from neutral and raised their price target to $23 from $15. The $19B aluminum producer trades at a P/E ratio of 15.38x (2015 estimates) with 25% EPS growth, price to sales ratio of 0.82x, price to book ratio of 1.54x on 9% revenue growth expected for this year. A stronger U.S. dollar and the closing of unprofitable plants are likely going to help the company post a solid number later this afternoon.


  1. KBH- KB Home reports Q4 earnings before the bell tomorrow morning. Analysts are looking for $0.56 per share on revenue of $778M. The options market is pricing in a $1.15 move, or 6.89%, in either direction this week. The stock has closed after earnings reporting earnings on 4 out of the last 7 reports (up on 3 out of the last 4). The call to put ratio is 2:1, led by roughly 2,000 Jan 2015 $17 calls bought for $0.39-$0.54 each (below the open interest). Today, Raymond James upgraded the stock to outperform from market perform and JPMorgan Chase kept their overweight rating, but lowered their price target to $19.50 from $22. KBH shares trade at a P/E ratio of 12.20x (2015 estimates), price to sales ratio of 0.68x, and is projected to see double digit top and bottom line growth for the next few years. Look to see what the company says about the impact of lower oil prices do to their business in the likes of Texas and other energy related areas.

KB Home

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