Pfizer, Inc. (PFE) is a global bio-pharmaceutical company engaged in the discovery, development and manufacture of healthcare products operating in 3 segments: Global Innovative Pharmaceutical, Global Vaccines, and Oncology and Consumer Healthcare. The stock is currently trading around $34.11 at the upper end of its 52 week range of $27.51-$35.53. The stock has been out performing the market this year rallying 9.69% year to date. PFE is scheduled to report earnings before the opening bell tomorrow, and the stock is down $0.14 or 0.42% on the session ahead of the close.
Over the past 8 quarters PFE has rallied on earnings day 4 times with an average move of 1.2%. The stock appears flat on a chart going into the release having traded within the same range of 33-35 since February on the daily bars. Investors noticed a lower EPS estimate for this quarter compared to 1Q15. This quarter the company reported an estimate lower than predicted, but Pfizer reiterated no change in its operational outlook. This revision is simply a reflection of the negative impact of foreign exchange issues, primarily the weak Euro. The company generates about 21% of its revenue from developed Europe. With a flat chart, strong resistance from 52 week high and a weak Euro it is hard to justify anything, but a short position on PFE.
The options market is currently implying a move of around $1.25 or 3.67% in PFE by this Friday’s close giving us targets of $32.86 and $35.36.
Trade: Buy this week’s 33.5-32.5 Vertical put spread for $0.25
Risk: $25 per lot
Reward: $75 per lot
Break Even: $33.25