As earnings season heats up, Bank of America believes certain stocks could experience large one-day swings on the back of their reports, creating opportunities for investors if they know where to look. Bank of America examined stocks with the highest implied volatility to go into its earnings releases. A stock’s implied volatility is calculated using the market price of its options. The key figure reflects how strongly the market expects the price of a share to rise or fall. High volatility indicates higher potential movement. To date, more than 90 companies in the S&P 500 have reported their fourth quarter results. According to FactSet, 68% of these companies have achieved better-than-expected results. Tech giant Microsoft is among the latest to join this group after announcing better-than-expected earnings per share on Tuesday despite slowing revenue growth. However, that hit rate is below the historical average of 79%, according to The Earnings Scout’s Nick Raich. Here are some stocks that could see some big swings, according to Bank of America data. One stock that made the list is Tractor Supply, with Bank of America noting that the options market signals a potential 4.7% either-way move following the gains. Analysts polled by Refinitiv expect the company to post double-digit earnings and revenue growth. Tractor supply is down more than 5% year-to-date but is up more than 9% over the past six months. Expected to report Thursday before the bell. Shares of Mastercard could also move sharply on the gains as the options market prices in a 3.8% swing either way. The company’s stock is up 9.03% year-to-date. KeyBanc upgraded Mastercard shares from sector weight to overweight earlier this month, citing the company’s “long-lived growth momentum.” Mastercard is expected to report the results on Thursday. Valero Energy, the second largest US refiner by capacity, will also report results on Thursday. Bank of America estimates oil refiner stocks could fluctuate 4.2%. Analysts are divided on the stock’s path to profitability — JP Morgan and Morgan Stanley rate the stock as a “buy,” according to TipRanks, while Goldman Sachs rates it as a “sell.” Valero Energy shares are up 12.4% year to date on strong demand for gasoline and diesel. VLO YTD Mountain VLO in 2023 Bank of America also expects Southwest Airlines stock to see big swings, with options market prices showing a 4.4% move in either direction after the airline announced earnings on Thursday has given. The airline has made headlines in recent weeks thanks to its holiday crisis, which has cost it up to $825 million. Intel could also see a big move after the gains. Bank of America noted that the stock’s implied volatility reflects a swing of 7.6% when the company releases its earnings report on Thursday after the IPO. – CNBC’s Michael Bloom contributed to the coverage.
https://www.cnbc.com/2023/01/25/bank-of-america-says-these-stocks-are-set-for-a-wild-ride-on-earnings.html Bank of America says these stocks are poised for a wild earnings run