S&P 500 constituent and biotech giant Amgen, Inc. (NASDAQ:AMGN) reports earnings Wednesday night. But in front of the release, are there clues to whether investors are preparing for a bullish or bearish event in AMGN?
Let’s take a look at Amgen’s recent quarterly announcements, the AMGN price chart and what, if anything, the options market is estimating in front of the earnings report.
AMGN Earnings Picture
In front of Amgen’s Wednesday night second-quarter earnings release, 20 analysts are forecasting profits of $2.74 per share. Views range from $2.52 to $2.94.
The current consensus estimate compares to last year’s, same quarter result of $2.57 and represents an increase of 6.6%. Full-year profit views are for AMGN to earn $11.17 in 2016 which would yield growth of 7.6%.
On the sales side, Amgen stock’s revenues are expected to rise to $5.6 billion versus 2015’s Q2 result of $5.4 billion. Sequentially, sales are forecast to show an even more modest increase of 1.80% from Q1’s $5.5 billion.
Full-year sales forecasts for AMGN are pegged at $22.6 billion, representing an increase of 4.2% over 2015’s $21.7 billion. Looking further out, the company is expected to see a sales gain of 3.4% in 2017 to $23.3 billion.
AMGN Stock Short-Term Trading Record
AMGN has established an intermediate-term perfect record of beating Street profit views. Over the last 12 quarters, the company has topped estimates 100% of the time.
More recent investor reaction in AMGN stock has proven varied. Shares have notched three price gains and three declines in the report’s immediate aftermath. Working backwards, it has moved -1.41%, 2.95%, -1.29%, 2.85%, 0.38% and -2.67% in the last six quarters.
The overall investor reaction has resulted in a modest average gain of 0.13% and variability of 2.35% based on a one standard deviation reading.
AMGN’s seven day stock performance has deviated even further from the bullish-sounding headline earnings result with an average performance of -2.05% and one standard deviation of 2.15%.
AMGN Stock Weekly Chart
The weekly chart reflects a fairly strong technical picture. Over the last 20 months, shares have digested a three year price run which took AMGN from under $50 a share by carving out two adjoining consolidation patterns below its all-time-highs of $181.81.
The first formation of several months, a loose lateral congestion pattern, resulted in a failed breakout to new all-time highs. A second formation began as Amgen appeared to be breaking down below lateral support only to reverse higher.
Subsequent rallies stalling near $165 in AMGN stock and higher lows have produced a bullish ascending triangle pattern which is now attempting to break out.
Coupled with its relative price strength within the large capitalization biotech arena, our technical interpretation is Amgen is poised to lead a bullish rotation into one of the market’s out-of-favor sectors of this past year.
AMGN Stock Options Pricing
Pricing by options traders point to a 68% chance AMGN stock will remain within a range of around $160 to $172.90 through this Friday.
The math behind the price range calculation is based on the at-the-money weeklys July 29 $165 straddle market which are trades on implied volatility of 28% with five trading sessions left.
The weeklys contract is the purest play on Amgen’s earnings event and tells us what traders collectively expect from AMGN stock in the immediate aftermath of its quarterly announcement.
The expected dollar move up or down works out to about 3.8% by Friday’s close. With earnings out Wednesday night, options traders positioning in this contract have two sessions for AMGN to react to the report.
Bottom line, there’s still a couple trading days left until the announcement. However, it appears investors are bracing for a stronger-than-normal move relative to recent events — and possibly higher prices and contrary to that short-term trend as well.
Investment accounts under Christopher Tyler’s management do not currently own positions in any of the securities or their derivatives mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT.
