Market Overview

Upcoming Earnings: CAT, LLY And BA Report This Week

Share:
Upcoming Earnings: CAT, LLY And BA Report This Week

Earnings season continues this week with reports from Caterpillar Inc. (NYSE: CAT), Eli Lilly and Co. (NYSE: LLY) and Boeing Co. (NYSE: BA). CAT and LLY both report before market open on Tuesday, Apr. 24. BA is scheduled to report before the open on Wednesday, Apr. 25.

Caterpillar Earnings

After an 18 percent revenue decline in 2016, CAT’s revenue increased 18 percent in 2017 as commodity prices continued to recover and economic growth accelerated in major global economies including the U.S. and China.

In its most recent report, revenue grew 35 percent year over year, helped by double-digit growth across all of its major business lines. Construction industries, the company’s largest segment by revenue, and resource industries grew the fastest and were up 47 percent and 53 percent year over year, respectively. The energy and transportation segment, the company’s second largest by revenue, grew the slowest and was up 22 percent year over year to $4.7 billion.

There have been some factors—positive and negative—that have been adding uncertainty around the business in recent quarters. Since China is a large end market for CAT, one of the concerns among analysts and investors has been the potential escalation in tariffs between China and the U.S.

Another has been whether or not a U.S. infrastructure spending bill would be passed, which CAT’s construction segment is expected to benefit from. Currently, CAT hasn’t been modeling any expected impact of new infrastructure spending into its guidance.

For Q1, CAT is expected to report adjusted EPS of $2.11, up from $1.28 in the prior-year quarter, on revenue of 11.58 billion, according to third-party consensus estimates. On a sequential basis, both revenue and earnings are expected to decline. In Q4 2017, CAT reported adjusted EPS of $2.16 on revenue of $12.9 billion, which came in well above estimates of $1.77 and $12 billion. 

caterpillar-cat-company-profile-q1-2018.png
CATERPILLAR COMPANY PROFILE. Caterpillar Financial, which provides financing options for the company’s equipment, is a smaller segment of the company’s business, but it helps generate profit and sell new products. In 2017, the segment generated $2.7 billion in revenue and $590 million in profit. CAT attributed $11.22 billion in new business volume as a result of the segment. 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.

Around the upcoming earnings release, options traders have priced in a 5.1 percent stock move in either direction, according to the Market Maker Move indicator on the thinkorswim® platform. Implied volatility was at the 71st percentile as of this morning.  

In short-term trading at the Apr. 27 weekly expiration, calls have been active at the 155 and 160 strike prices, while trading on the put side has been a little lighter and concentrated at the 150 and 155 strike prices.

Looking further out at the May 18 monthly expiration, trading in calls has been heavier at the 160 and 164 strike prices, while trading on the put side has been mostly concentrated at the 140, 145 and 150 strikes.

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.

Eli Lilly Earnings

Like most major pharmaceutical companies, LLY has faced challenges from older blockbuster drugs coming off patent and pressuring revenue as those sales are lost to generics and other new drugs coming to market.

LLY sees its recent drug launches, as well as its pipeline, helping it achieve 5 percent annual sales growth through 2020. In Q4 2017, most of its established products continued to decline in sales, except for Forteo, Humulin, Cymbalta and Erbitux. In its new products, revenue increased 102 percent year-over-year to $1.43 billion. Growth in its new products helped the company achieve 7 percent year-over-year revenue growth overall in Q4.

For Q1, LLY is expected to report adjusted EPS of $1.13, up from $0.98 in the prior-year period, on revenue of $5.52 billion, according to third-party consensus estimates. Revenue is projected to increase 5.5 percent year over year.

LLY announced in October 2017 that it is exploring the potential sale or spin-off of its Elanco Animal Health Unit, and expects to provide an update sometime in mid-2018. LLY’s animal health unit generated $3.09 billion in revenue in 2017. Most analysts see the move as a positive that would allow the company to focus exclusively on its pharmaceutical business. 

eli-lilly-lly-stock-chart-earnings-q1-2018.png ELI LILLY 2018 STOCK CHART. LLY has been lagging the S&P 500 (SPX) and so far this year the stock is down 6.64 percent. The stock dropped sharply when it last reported at the end of January, which some attributed to management’s comments around drug pricing. However, they did report about the same time that the market selloff at the star of February kicked off, so as always there was a variety of factors influencing the stock price. Chart source: thinkorswim® by TD Ameritrade.  Not a recommendation. For illustrative purposes only. Past performance does not guarantee future results.

Options traders have priced in about a 3.8 percent stock move in either direction around the upcoming earnings release, according to the Market Maker Move indicator. Implied volatility was at the 84th percentile as of this morning.

In short-term trading at the Apr. 27 weekly expiration, there hasn’t been a whole lot of activity on either the call or the put side. Most of the trading on the call side has been concentrated at the 79 and 79.5 strike prices, while the 79-strike put has been more heavily traded.

At the May 18 monthly expiration, trading on the call side has been concentrated at the 82.5 and 85 strike prices, while most of the recent trading on the put side has been at the 80 strike.

Boeing Earnings

BA ended up being the best performer in the Dow ($DJI) in 2017 with just shy of a 90 percent gain. A combination of increased defense spending and strong demand for commercial aircraft had provided tailwinds for the company in much of 2017.

So far in 2018, the stock is up a little over 14 percent year-to-date, but there has been a lot more volatility alongside China’s threats that it would impose tariffs on imported aircraft. So far, those tariffs haven’t actually been enacted.

BA recently released its Q1 deliveries, which showed the company had delivered a total of 184 commercial airplanes, comprised mostly of 132 737 models and 34 787 models. Both the 737 and the 787 are the company’s main focuses right now, with the 737 making up a significant portion of the company’s $421 billion order backlog in the commercial airplanes segment.  

For all of 2018, BA plans to ramp up production of the 737 to 52 units per month, up from 47 units per month in 2017, while it plans to keep 787 production steady at 12 units per month.

For Q1, BA is expected to report adjusted EPS of $2.56, compared to $2.01 in Q1 2017, on revenue of $22.2 billion, according to third-party consensus estimates. Revenue is projected to increase 5.8 percent year over year. 

ba-boeing-stock-chart-earnings-q1-2018.png
BOEING SINCE START OF 2017. BA has had an incredible run if you look back to the start of 2017. Over that time, the stock is up a little under 116 percent, compared to an 18.26 percent return in the S&P 500 (SPX). The stock has been a little bit more volatile in 2018 than in 2017, but shares are still up a little over 14 percent so far this year. Chart source: thinkorswim® by TD Ameritrade.  Not a recommendation. For illustrative purposes only. Past performance does not guarantee future results.

Around BA’s upcoming report, options traders have priced in about a 4.6 percent stock move in either direction, according to the Market Maker Move indicator. Implied volatility was at the 76th percentile as of this morning.

In short-term trading at the Apr. 27 weekly expiration, the 340-strike call and the 335-strike put have been more active. At the May 20 monthly expiration, activity on the call side has been spread out across a range of strikes between 330 and 360, while volume has been lighter on the put side and mostly concentrated at strikes ranging from 340 down to 320.

Overall during Friday’s trading session, volume was a little higher on the call side with a put/call ratio of 0.772.

What’s Coming Up

In addition to CAT, LLY and BA, these are some of the other major companies reporting earnings this week:

  • Twitter inc. (NYSE: TWTR) reports before the open Wednesday, Apr. 25 and Facebook, Inc. (NASDAQ: FB) reports after the close the same day
  • Ford Motor Company (NYSE: F) reports after market close Wednesday, Apr. 25 and General Motors Company (NYSE: GM) reports before the open Thursday, Apr. 26
  • Amazon.com, Inc. (NASDAQ: AMZN), Intel Corporation (NASDAQ: INTC) and Microsoft Corporation (NASDAQ: MSFT) all report after market close Thursday, Apr. 26
  • Chevron Corporation (NYSE: CVX) and Exxon Mobil Corporation (NYSE: XOM) report before the open Friday, Apr. 27

Later in the week, both the European Central Bank and Bank of Japan have meetings scheduled on Apr. 26-27. The next Fed meeting is coming up the following week on May 1-2. For a look at what else is going on, make sure to check out today’s market update if you have time.

Information from TDA is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for illustrative purposes only. Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade.

Posted-In: JJ Kinahan TD Ameritrade The Ticker TapeEarnings News Previews Markets Trading Ideas

 

Related Articles (AMZN + BA)

View Comments and Join the Discussion!

Mid-Day Market Update: Prothena Slides After Lead Drug Fails Phase 2 Trial; The Stars Group Shares Surge

Goldman Cites Lack Of Competition In Bullish Coupa Software Initiation