Earnings season starts up again next week with Alcoa’s (AA) report on April 8th. We’re in the process of getting out our Q1 ’15 Earnings Season Calendar, and below we provide our quarterly list of the most volatile stocks on earnings.
Using our Interactive Earnings Report Database (available to Bespoke Institutional members), which contains data for more than 100,000 individual earnings reports, we calculated the average move that each stock typically experiences on its “earnings reaction day”. The “earnings reaction day” is the trading day following the stock’s quarterly report. So if a company reports after the close, the “earnings reaction day” is the following trading day. If a company reports before the open, the “earnings reaction day” is that trading day.
Remember, we’re looking at the average absolute one-day % change on earnings for individual stocks. So if NFLX goes down 20% following one earnings report and goes up 10% on its next earnings report, its average move on its earnings reaction day for those two reports would be +/-15%.
Before we highlight the most volatile individual stocks on earnings, we wanted to look at earnings volatility by sector. Below is a chart highlighting the average move that stocks experience on their “earnings reaction days” by sector.
For all stocks in our Earnings Database, the average change that it experiences on its “earnings reaction day” is +/-5.22%. That means that you can expect a move of a little more than 5% for the average stock that reports earnings each quarter. Technology stocks are unsurprisingly the most volatile on earnings — averaging a move of +/-7.1% on their report days. This is almost a full percentage point more volatile than the next most volatile sector — Consumer Discretionary.
Just as you would expect Technology stocks to be the most volatile on their “earnings reaction days”, Utilities are by far the least volatile. The average Utilities stock that reports earnings only moves +/-2.06% on its report day. The Financial sector sees the next lowest earnings volatility.
Onto the list of most volatile stocks on earnings —
As shown below, Groupon (GRPN) is the most volatile stock in the US when it reports earnings. Throughout its history of quarterly reports, GRPN has averaged a move of +/-17.08% on its “earnings reaction day”. ANGI ranks second with volatility of +/-16.94%, followed by IQNT, BSFT and UBNT.
Yelp (YELP) ranks sixth with an average move of +/-15.01% on its “earnings reaction day”. Other notable stocks on the list include Netflix (NFLX), Green Mountain Coffee (GMCR), Pandora (P), First Solar (FSLR), Priceline (PCLN), and Intuitive Surgical (ISRG). All of these are widely traded momentum/growth stocks that typically see huge moves when they report earnings.
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