2015-01-29 Pre-Earnings Analysis (DECK) (RHI)

Posted on January 29th, by Mitchell Warren in Free Articles, Options Risk Management, Trade Ideas, Unusual Options Activity. Comments Off on 2015-01-29 Pre-Earnings Analysis (DECK) (RHI)

Pre-Earnings Analysis

  1. DECK- Deckers Outdoor is set to announce Q3 earnings after the bell tonight. Analysts are looking for $4.52 per share in EPS on revenue of $814.39M. Shares have fallen after reporting quarterly results on 4 out of the last 7 occasions (higher on 2 out of the last 3 though). The stock is off by more than 17% from the December highs (short interest around 20%) for a company that has beat earnings estimates by at least $0.11 in each of the last five quarters. Earnings for the $3B maker of UGG, Teva, and Sanuk are likely to grow 16-17% in FY15 (vast majority coming from Q3) and see similar strength into FY16 as sales are projected to top $2B next fiscal year (10%+ growth). Shares trade at a P/E ratio of 14.81x (Mar 2016 estimates), price to sales ratio of 1.78x, and a price to book ratio of 3.15x. Several Wall Street firms have cut their price target in the last two months, but the consensus is for a $100 share price (just above the December highs). Today, someone put on the Jan 30 weekly $83/$89 bull call spread for a $2.65 debit. Volume was above the open interest in both options. The call to put ratio was nearly 4:1 (net call premium +$1.1M vs net put premium of +$118K). The options market is pricing in a $7.15 move, or 8.69%, in either direction through the end of the week. This would put DECK around the $89 level if it resolves to the upside.

Deckers Outdoor

  1. RHI- Robert Half International is also going to release Q4 earnings after the bell tonight. Analysts are looking for $0.61 per share in EPS on revenue of $1.2B. Shares have moved higher after earnings on 4 out of the last 7 reports (up on the last 3 reports). Robert Half has been a beneficiary of the improving job market and the increase in temporary employees as they are one of the largest staffing companies in the world. The stock trades at a P/E ratio of 22.76x (2015 estimates) with 15.2% EPS growth, P/S ratio of 1.69x, and a P/B ratio of 7.92x. Sales are forecast to grow 9% this year to more than $5B. On November 18th and 25th,  Deutsche Bank raised their price target to $62 from $55 and Bank of America raised their price target to $64 from $58. On January 22nd, someone bought 2,500 Feb $60 calls for $1.40 each and this is when open interest was already 1,331 contracts (now 3,750). He/she has a breakeven point of $61.40 on February options expiration. February options are pricing in roughly a $3.70 move, or 6.30%, in either direction through expiration.

Robert Half International

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