Exxon Mobil Earnings: 2 Trades for XOM Stock

Advertisement

Blue-chip oil baron Exxon Mobil Corporation (NYSE:XOM) has seen better days. The company has endured the brunt of plunging oil prices, which remain near multi-year lows due to oversupply and a weak global economy.

Exxon Mobil Earnings: 2 Trades for XOM StockBut Exxon Mobil has a chance to reassure investors about the future Thursday morning, when the company will step up to release its first-quarter earnings report.

For the record, Exxon Mobil earnings are expected to come in at 89 cents per share, sharply lower than year-ago results of $2.10 per share. Revenue, meanwhile, is expected to plunge 50.2% to $53.1 billion.

Historically, Exxon Mobil has a habit of topping the consensus estimate, having bested Wall Street’s targets in each of the past six quarters. This may be why analysts reporting to EarningsWhisper.com have helped push Exxon’s whisper number to 82 cents per share for the first quarter.

Unfortunately for XOM stock traders, this is about as enthusiastic as the analyst community gets concerning the stock’s future. According to data from Thomson/First Call, XOM has attracted just six “buy” ratings, compared to 15 “holds” and three outright “sell” ratings. What’s more, the 12-month consensus price target of $92 represents a meager premium of just 5.7% to yesterday’s close.

Clearly there is room for potential upgrades or price-target increases, but Exxon Mobil could have a hard time convincing these bears to change their minds as long as oil prices remain low.

Turning to the options pits, we find lingering trepidation surrounding XOM stock. Currently, the May put/call open interest ratio arrives at a seemingly positive reading of 0.66. However, this ratio has been trending higher lately, indicating a growing lack of confidence in Exxon Mobil earnings. Furthermore, the weekly May 1 series put/call open interest ratio arrives at 0.76, with puts much more popular in among options set to expire at the end of this week.

4-28-2015 XOM
Click to Enlarge
 Overall, weekly May 1 series implieds are pricing in a potential post-earnings move of about 2.2%. This places the upper bound at $88.92, while the lower bound lies at $85.07. Technically, XOM has rebounded nicely over the past couple of weeks, and a rally toward resistance at $89 could be enough to shake loose a few short-term bears and extend this rally. On the downside, support is strong in the $85 region, and XOM is resting above all of its major short-term moving averages.

2 Trades for XOM Stock

Call Spread: For those traders looking to capitalize on an unwinding of negative sentiment and a continued rally for XOM stock, potential post-earnings bounce, a May $87/$89 bull call spread could fit the bill. This trade was offered at 89 cents, or $89 per pair of contracts, at last check. Breakeven lies at $87.89, while a maximum profit of $1.11, or $111 per pair of contracts, is possible if XOM stock closes at or above $89 when May options expire.

Put Sell: Alternately, if you’re not sold on an XOM rally, you could look into a bull put sell position. Along those lines, a weekly May 1 series $84 put sell might be a way to capitalize on XOM’s strong technical backdrop.

At last check, the weekly May 1 series $84 put was bid at 14 cents, or $14 per contract. The upside to this put sell strategy is that you keep the premium as long as XOM stock closes above $84 when these options expire at the end of this week. The downside is that should XOM trade below $84 ahead of expiration, you could be assigned 100 shares for each sold put at a cost of $84 per share.

As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.

More From InvestorPlace


Article printed from InvestorPlace Media, https://investorplace.com/2015/04/exxon-mobil-earnings-2-trades-xom-stock/.

©2024 InvestorPlace Media, LLC