Lowe's Companies, Inc. (
) is slated to release its third-quarter earnings on Monday, Nov.
15, with analysts expecting a profit of 30 cents per share. LOW has
a mixed earnings report card; in the past four quarters, the
company has twice surpassed, once met, and once fallen short of the
Despite LOW's checkered earnings history, analysts are quite
optimistic toward the retailer. For starters,
reports that the stock has earned 15 "buy" or better ratings,
compared to 10 "holds" and zero "sells." In the same bullish vein,
pegs the equity's consensus 12-month price target at $25.79 -- a
premium of 18% to LOW's close at $21.86 on Wednesday, as well as
territory not explored since May.
Option players, too, are upbeat. LOW's Schaeffer's put/call open
interest ratio (SOIR) of 0.59 ranks in the 17th percentile of its
annual range. In other words, short-term traders have been more
optimistically aligned toward the shares just 17% of the time
during the past 12 months.
Similarly, the International Securities Exchange (ISE) reports
that 31.5 calls have been bought to open for every put purchased
during the past two weeks. This call-heavy ratio ranks above 95.9%
of all other readings taken during the past year, pointing to
near-peak levels of bullish speculation on LOW.
This optimistic trend has continued today, with 12,000 calls
changing hands so far -- more than double the equity's expected
single-session call volume of roughly 4,700 contracts. By contrast,
fewer than 1,250 puts have been exchanged.
Today's most popular strike has been LOW's November 24 call, with
over 5,000 contracts traded -- the bulk of which changed hands at
the ask price, indicating they were likely purchased. However, with
roughly 8,600 contracts currently open at this strike, it's unclear
whether these calls are, in fact, fresh positions. If these
November 24 calls were bought to open, then it would seem that
traders are counting on LOW to muscle above the $24 level over the
For the front-month series -- which expires after the close next
Friday, Nov. 19 -- peak call open interest of roughly 12,000
contracts can be found at the 22 strike. Meanwhile, substantial
accumulations of calls can also be found at the November 23, 24,
and 25 strikes. As expiration nears, these out-of-the-money calls
could create a headwind for the shares.
From a technical perspective, it's unclear why option traders
are so optimistic about LOW. The shares have been confined in a
pattern of sideways movement between $21 and $23 since the start of
September. Reinforcing the upper rail of this range are LOW's
32-week and 50-week moving averages, which have conspired to keep
the stock in check since June.
In light of LOW's technical -- and fundamental -- troubles, the
abundance of optimism among traders and analysts could actually
work against the shares. Should the home improvement retailer
reveal less-than-stellar figures in Monday's report, a reversal of
sentiment from the bulls could pressure the shares
er on the charts.