Earnings Next Week is all About LULU

Next week is the biggest lull we will get this summer in the earnings calendar as only the always fun Lululemon Athletica (LULU) is scheduled to report earnings before the open on Tuesday next week. Since we have only one company reporting with short dated options available for trading I thought I would dig into this one a little more. First, here are the historical numbers for LULU based on the last three years or twelve quarters.

LULU

Based on history, an average LULU move higher or lower off earnings is 9.54%. As I write this the stock is trading at 61.70 so this would mean an average stock reaction to earnings would result in a move higher or lower of 5.88. Last quarter the stock was up about 5% which is lower than the average move. We also have some outliers with the stock gaining as much as 13.91% and losing as much as 17.54% when earnings were released. The graph below is a depiction of all the price moves on a percentage basis for the last three years.

LULU Bar

Any known unknown like an earnings announcement will attract trader’s interest and we typically see an increase in option trading activity.   Those option trades have to start with some sort of price outlook for the underlying market and in the case of earnings announcements, the historical price reactions is a good place to start.