Earnings Snapshots for Week of

Overview

JP Morgan (JPM) will report earnings 7/14 before the open and the Street expecting $1.44 EPS and $24.53B in Revenues, FY15/16 projections at $5.84/$98.38B and $6.48/$103.21B. JPM shares closed higher on earnings last quarter after being lower 3 of the previous 4, and a 6 quarter average max move of 3.8% and average closing move of 2%. The $250B Bank trades 10.35X Earnings, 1.17X Book and 8.4X FCF with a 2.62% dividend yield, EPS jumping 21.6% in 2014 and looking at 8-10% forward growth. JPM has just 1.2% of its float short, up from 0.89% in February, but a small number, while institutional ownership at 79% is hitting a 5 year high. Fed H8 data shows solid Q2 loan growth trends that should support earnings, while strong M&A and housing should also be positive tailwinds to the sector. On 6-29 OpCo cut JPM to Perform from Outperform, while on 6-24 Argus raised its target on JPM to $77 as revenue growth begins to outweigh compliance costs. JPM shares recently pulled back and nearly touched the 20 week EMA, but did violate the uptrend off the February lows, and a move back to the 200 day MA at $61, or a 38.2% Fibonacci to $63.30 could be in the cards before new longs are interested. Shares did bounce just above the key $65 strike and also its IchiMoku Cloud. JPM options are pricing in a 2.39% move on earnings, fairly priced, and July skew fairly steep sloped compared to August. I would note that JPMs worst two reactions to earnings came after the prior day saw a Put/Call ratio above 1, something to watch for on Monday ahead of results. On 6-15 a trader bought 60,000 JPM September $65 calls at $4.20, rolling out of June, a position has been rolling out for a few months now, and also that say a buyer of 4,500 August $65 calls $3.70 and 6,000 December $67.50 calls at $3.60. On 6-8 the August $67.50 calls were bought to open 65,000X at $1.90 to $2. On 6-11 a buyer of 5,000 July 24th (W) $69 calls paid $1.33 and remains in OI. Options sentiment has been bullish overall, open interest in calls 1.4X the open interest in puts.

JP Morgan (JPM)

Earnings Date IV1 IV2

IV1/IV2

Ratio

Straddle

Price

Implied

Move

IV30/HV30

Ratio

Actual

Max Move

Closing

Move Put/Call

14-Jul 26.35% 19.50% 1.35 $1.60 2.39% 1.16

14-Apr 23.70% 18.70% 1.27 $1.25 2.03% 1.13 2.48% 1.56% 0.91

14-Jan 38.60% 24.35% 1.59 $1.67 2.84% 1.02 -6.06% -3.45% 1.16

14-Oct 39.20% 25.30% 1.55 $1.91 3.28% 1.49 -3.61% -0.29% 1.31

15-Jul 24.50% 16.60% 1.48 $1.56 2.77% 1.33 4.26% 3.51% 0.71

11-Apr 25.65% 21.65% 1.18 $1.47 2.98% 1.27 -1.74% -0.60% 0.64

14-Jan 34.30% 18.77% 1.83 $1.66 2.88% 1.25 1.52% 0.06% 0.87

11-Oct 31.20% 23.40% 1.33 $1.85 3.51% 1.27 1.58% -0.01% 0.61

12-Jul 26.50% 21.00% 1.26 $1.71 3.10% 0.98 1.28% -0.30% 0.73

12-Apr 25.65% 21.65% 1.18 $1.47 2.98% 1.27 -1.74% -0.60% 0.64

16-Jan 39.50% 21.65% 1.82 $1.39 3.00% 1.29 -1.68% 1.01% 0.41

Trade to Consider: Long the JPM July $67.5/$65/$62.5 Butterfly Put Spread at $0.60 Debit

YUM! Brands (YUM) will announce results 7/14 after the close and the Street view at $0.63 EPS and $3.19B in Revenues, FY15/16 projections $3.48/$14.07B and $4.07/$15.3B. YUM shares have closed higher each of its last 3 earnings reports, and a 6 quarter average max move of 5.15% and average closing move of 3.8%. The $39.3B owner of restaurants like KFC, Pizza Hut and Taco Bell trades 22.4X Earnings, 3X Sales, and yields 1.8% with EPS in 2014 down 2.1% y/y, but expected to jump 15% in 2015 and double digit EPS growth ahead. YUMs short interest at 2.2% of the float has more than doubled in the last 4 months, but remains low in context, while institutional ownership shot up considerably to 85%, a 5 year high. On 7-1 UBS was out with a note raising its target on YUM to $116, noting that activist investors are likely to push strategic alternatives to unlock value, such as a spin-off of its China division. On 5-15 JP Morgan upgraded YUM to Overweight with a $108 target. YUM was a notable name in Q1 filings as Third Point LLC bought 3.3M shares, Corvex Mgmt. bought 1M+ shares and Longview is a top holder with 8.9M shares. Into the quarter expectations are for Yum China comps to be -7%, while non-China businesses face easy comps with Q2 same store sales growth expected to be 4% at KFC, 1% at Pizza Hut and 5% at Taco Bell. China will be the focus on the YUM call once again. On the chart YUM shares since clearing the key $82.50 level made a strong run to new highs, pulling back some last week to touch its 20 week EMA before rebounding. The RSI uptrend broke and on further weakness a 50% retracement back to around $81 would be a nice buy the dip area. Shares have significant resistance near $92.50, and upside target would be $97.50 on a breakout. YUM options are pricing in a 5.78% move on earnings, rich compared to actual moves, but cheaper than the prior two quarter implied moves. YUM options positioning has been very bullish, especially out in October where OI of the $90 calls at nearly 10,000 and the $95 calls nearing 10,000 as well. On 7-7 a trader bought 3,000 August $90/$100 call spreads and also the August $92.5 calls were bought to open 6,000X at $2.15. August skew is still steeply sloped, not reflective of the bullish options activity.

YUM! Brands (YUM)

Earnings Date IV1 IV2

IV1/IV2

Ratio

Straddle

Price

Implied

Move

IV30/HV30

Ratio

Actual

Max Move

Closing

Move Put/Call

14-Jul 57.00% 36.00% 1.58 $5.25 5.78% 1.65

21-Apr 31.00% 26.20% 1.18 $5.15 6.37% 1.73 5.50% 3.94% 0.57

4-Feb 38.00% 27.20% 1.40 $4.50 6.11% 1.32 2.59% 2.10% 1.66

7-Oct 40.45% 27.62% 1.46 $3.00 4.19% 2.49 3.25% 1.44% 1.19

16-Jul 60.30% 22.00% 2.74 $2.95 3.57% 2.08 -7.32% -6.89% 1.61

22-Apr 30.20% 24.40% 1.24 $4.80 6.20% 1.56 2.86% -0.86% 0.94

3-Feb 53.40% 34.95% 1.53 $3.95 5.88% 1.86 9.70% 8.91% 0.68

8-Oct 38.10% 24.20% 1.57 $3.10 4.33% 1.95 -9.41% -7.24% 0.90

10-Jul 36.50% 25.50% 1.43 $3.25 4.49% 1.20 -2.73% -1.14% 1.55

23-Apr 32.70% 26.30% 1.24 $4.20 6.55% 1.59 8.77% 7.01% 2.62

4-Feb 48.20% 32.60% 1.48 $4.15 6.49% 1.43 -6.66% -2.90% 2.30

Trade to Consider: Long the YUM July/August $95 Calendar Call Spread at $0.80 Debit

Netflix (NFLX) will release results 7/15 after the close with the Street calling for $0.31 EPS and $1.65B in Revenues, and FY15/16 projections of $1.31/$6.78B and $3.10/$8.46B. NFLX shares have closed higher each of the last two reports, a 6 quarter average max move of 16.4% and average closing move of 13.8%. The $41.25B media Co. trades 215X Earnings, 7.1X Sales and in 2014 generated 133.5% EPS growth with 140%+ expected in 2015, a premier growth stock that is expanding Internationally. NFLX short interest is at 8.6% of the float, down since February and nearing a 5 year low, while Institutional ownership stands at 92%, near a 5 year high. On 7-10 Stifel was out with a bullish piece seeing potential for a $100B Company by 2020, more than double its current market cap, noting strong slate of originals with potential for higher ARPU and operating margins the next 5 years. Nomura and Morgan Stanley each raised their targets to $750 as well last week and MKM with an $885 target noting the opportunity outside the US, looking for 100M+ subscribers internationally by 2021. Carl Icahn remains a top holder with 1.41M shares. The key metric expectations into Q2 are domestic subscriber growth of 600,000 (42M total), and 1.9M International adds (22.78M total). NFLX shares have been trading in a narrow range for weeks between $650 and $690, though remaining in a powerful uptrend. NFLX shares are also nearing the upper band in a 10 year channel up pattern, though still room to $785-$800. On weakness I would expect support around the $600 level. NFLX options are pricing in an 8.96% move on earnings, cheapest in 3 quarters and well below average actual moves, noting NFLX long volatility has been profitable the past 3 reports. On 7-7 a trader bought 3,000 September $665 straddles for $95.55, expecting more volatility from shares, a name lacking any other notable open interest.

Netflix (NFLX)

Earnings Date IV1 IV2

IV1/IV2

Ratio

Straddle

Price

Implied

Move

IV30/HV30

Ratio

Actual

Max Move

Closing

Move Put/Call

15-Jul 88.85% 50.45% 1.76 $61.00 8.96% 2.18

15-Apr 89.20% 50.30% 1.77 $41.00 9.02% 1.59 19.62% 18.21% 0.81

20-Jan 96.00% 53.20% 1.80 $33.50 9.93% 1.50 18.88% 17.33% 1.11

15-Oct 61.50% 35.25% 1.74 $27.00 5.97% 1.42 -26.21% -19.36% 0.95

21-Jul 73.60% 46.10% 1.60 $30.25 6.81% 1.47 -5.94% -4.61% 0.94

21-Apr 96.70% 58.80% 1.64 $37.50 10.85% 1.47 9.29% 7.00% 0.80

22-Jan 97.60% 53.10% 1.84 $33.00 10.00% 2.10 18.54% 16.47% 0.88

21-Oct 105.50% 61.20% 1.72 $36.65 10.99% 1.26 9.62% -9.14% 0.88

22-Jul 126.94% 73.90% 1.72 $37.00 13.98% 1.63 -6.00% -4.46% 0.84

22-Apr 84.89% 63.94% 1.33 $30.80 17.61% 1.83 14.22% 12.75% 0.82

23-Jan 81.71% 64.24% 1.27 $16.45 15.93% 2.02 -14.96% -13.44% 1.43

23-Oct 71.27% 63.22% 1.13 $11.63 17.05% 2.04 17.83% 15.25% 0.73

Trade to Consider: Sell the NFLX July $690/$700 Put Spread and $775/$785 Call Spread for a $7 Credit (Risk $300 to make $700 per spread)

Google (GOOGL) will announce earnings 7/16 after the close with the consensus at $6.70 EPS and $17.75B in Revenues, FY15/16 projections of $28.26/$74.21B and $32.73/$85.45B. GOOGL shares have closed higher the last two reports and 6 of the last 8, an average 6 quarter max move of 4.6% and average closing move of 3.65%. The $372B Internet Co. trades 17X Earnings, 5.48X Sales, 3.49X Book and 28.1X FCF, EPS up just 2.9% in 2014 and expecting to return to 12.5-15% EPS growth forward. GOOGL short interest is low at 1.3%. GOOGL has some positive trends in mobile, YouTube and other areas, but the focus seems to remain on EC antitrust issues, accelerating declines in desktop search, margin pressure, and weakness in paid click trends. CSFB listed its target on GOOGL to $700 last week ahead of earnings and Needham at Buy with a $675 target noting mobile strength, renewal of the Apple search contract, and YouTube profitability. Viking Global bought 895K shares in Q1, nearly doubling their stake, and now its 8th largest holding. On the longer term chart GOOGL remains in a 6 year uptrend and has a 1.5 year consolidation pattern look, so an upside breakout could be explosive if shares can clear the $580 level, look for at least $625. On the other hand, a move below $525 support sets up for a possible violation of 2015 lows at $490, and lacks true support until the $450 mark. GOOGL options are pricing in a 3.46% move of earnings, below the actual average moves and the cheapest implied move in over 2 years. On 6-23 the August $580/$600 call ratio spread traded 850X1700 to open. GOOGL also has 1,500 Dec. $570/$540 put spreads in OI, and July $560 calls were very active Friday as 3,250 traded. On 6-4 buyers were active for 4,500 August $600 calls at $3.40 in the GOOG options and on 2-27 in GOOGL there was a large buyer of 1,000 September $570 calls at $20.70 that remains in OI.

Google (GOOGL)

Earnings Date IV1 IV2

IV1/IV2

Ratio

Straddle

Price

Implied

Move

IV30/HV30

Ratio

Actual

Max Move

Closing

Move Put/Call

15-Jul 36.20% 23.60% 1.53 $19.25 3.46% 1.48

23-Apr 39.25% 26.20% 1.50 $20.20 3.79% 1.46 4.88% 2.90% 0.495

29-Jan 39.00% 23.80% 1.64 $22.10 4.09% 1.02 5.82% 4.73% 0.55

16-Oct 48.25% 30.90% 1.56 $25.00 4.59% 1.58 -3.04% -2.54% 0.71

17-Jul 40.77% 23.83% 1.71 $24.35 4.15% 1.40 4.01% 3.72% 0.77

16-Apr 62.53% 37.19% 1.68 $35.00 6.51% 1.37 -4.34% -3.64% 0.47

30-Jan 51.45% 34.60% 1.49 $64.00 5.69% 1.81 4.50% 4.01% 0.66

17-Oct 38.00% 24.50% 1.55 $30.50 3.50% 1.67 14.25% 13.79% 0.71

18-Jul 46.00% 25.66% 1.79 $43.21 4.68% 1.78 -3.85% -1.54% 0.92

18-Apr 113.67% 27.39% 4.15 $37.55 4.90% 1.71 4.90% 4.43% 0.88

22-Jan 30.43% 24.41% 1.25 $43.30 6.16% 1.72 6.56% 5.49% 1.18

10/18/2013 (Early Leak) 48.40% 23.17% 2.09 $61.22 8.81% 0.79 -3.30% -1.90% 0.78

Trade to Consider: Long the GOOGL July $550 Straddle at $23

Schlumberger (SLB) will post results 7/16 after the close with the Street at $0.79 EPS and $9.02B in Revenues, FY15/16 projections of $3.46/$37.6B and $3.83/$39.38B. SLB shares have closed higher on earnings the last 3 reports and 6 of the last 8, a 6 quarter average max move of 4.15% and average closing move of 2.6%. The $106.6B Oil & Gas services Co. trades 22X Earnings, 2.24X Sales, 2.85X Book and 19.9X FCF with a 2.38% dividend yield, and EPS in 2014 was down 15.5% Y/Y. SLB has just 1.25% of its float short while Institutional ownership is at 79%. On 7-7 Howard Weil upgraded SLB to a Focus Stock with a $100 target, noting its global scale, technology and transformational initiatives make it a more defensive and quality name in a struggling industry. SLB has been cutting costs and is trying to offset declines in E&P spending with new technology and services offerings. Dodge & Cox bought 10.4M shares last quarter, its 3rd largest holding. SLB has a weak chart, trading below its major moving averages, and broke a 2009-2014 uptrend, which it re-tested earlier this year and failed, looking set up to roll over and possibly test the 12 year trend line at $72.50. SLB options are pricing in a 2.74% move, cheaper than the previous 3 quarter implied moves.

Schlumberger (SLB)

Earnings Date IV1 IV2

IV1/IV2

Ratio

Straddle

Price

Implied

Move

IV30/HV30

Ratio

Actual

Max Move

Closing

Move Put/Call

16-Jul 31.90% 25.00% 1.28 $2.30 2.74% 1.57

15-Apr 82.70% 26.00% 3.18 $2.90 3.16% 1.18 3.26% 1.05% 1.18

15-Jan 116.85% 41.40% 2.82 $3.70 4.83% 1.37 6.38% 6.13% 1.21

17-Oct 80.75% 34.50% 2.34 $3.10 3.42% 1.59 8.60% 3.67% 0.81

17-Jul 26.50% 20.32% 1.30 $2.70 2.35% 0.89 -3.37% -1.98% 0.86

17-Apr 27.81% 20.24% 1.37 $2.85 2.94% 1.28 -1.70% -1.02% 0.95

17-Jan 30.20% 21.70% 1.39 $2.70 3.06% 1.32 2.03% 1.80% 0.82

18-Oct 30.90% 23.20% 1.33 $3.15 3.50% 1.49 3.77% 2.79% 0.74

19-Jul 61.85% 22.86% 2.71 $2.15 2.74% 1.11 6.46% 5.42% 0.23

19-Apr 74.00% 29.75% 2.49 $2.55 3.59% 1.09 3.80% -1.47% 0.71

18-Jan 58.10% 23.00% 2.53 $1.95 2.66% 0.97 4.57% 4.26% 1.23

Trade to Consider: Long the SLB July/August $80 Put Calendar Spread at $0.90 Debit

Disclaimer:

These trade ideas are to be self-managed as there will be no follow-up, and each user must take full responsibility of the trade, and only take action on trades that fit his/her risk profile and are comfortable trading.

Not Investment Advice or Recommendation Any descriptions "to buy", "to sell", "long", "short" or any other trade related terminology should not be seen as a recommendation. The Author may or may not take positions in any of the names mentioned, and is not obligated to disclose positions, nor position sizes.

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