Honeywell International (NASDAQ:HON) is set to release its earnings report on Tuesday, April 29, 2025. An examination of its earnings performance over the last five years indicates a recurring trend of negative one-day returns following the announcement, occurring in 60% of the recorded instances. These negative returns have an average of -3.2% with a maximum of -7.6%.
For event-driven traders, grasping these historical trends could provide a potential advantage, although the actual market response will depend on how the reported figures measure up against consensus projections and broader market anticipations. There are typically two strategies to contemplate: either predict the immediate post-earnings movement by understanding historical probabilities and positioning appropriately before the announcement, or assess the relationship between short-term and medium-term returns after the announcement to guide subsequent trading approaches.
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Honeywell International’s Historical Odds Of Positive Post-Earnings Return
Here are some insights on one-day (1D) post-earnings returns:
- There are 20 earnings data points documented over the last five years, with 8 positive and 12 negative one-day (1D) returns noted. Overall, positive 1D returns occurred approximately 40% of the time.
- Remarkably, this percentage rises to 58% if we analyze data from the last 3 years instead of 5.
- The median of the 8 positive returns = 2.4%, and the median of the 12 negative returns = -3.2%
Additional information concerning observed 5-Day (5D) and 21-Day (21D) returns post earnings is outlined alongside the statistics in the table below.
Correlation Between 1D, 5D, and 21D Historical Returns
A strategy that is relatively lower in risk (although not valuable if the correlation is low) is to examine the correlation between short-term and medium-term returns after earnings, identify a pair that exhibits the highest correlation, and engage in the appropriate trade. For instance, if 1D and 5D reflect the highest correlation, a trader can position themselves “long” for the next 5 days if the 1D post-earnings return is positive. Below is some correlation data based on 5-year and 3-year (more recent) history. Note that the correlation 1D_5D indicates the relationship between 1D post-earnings returns and subsequent 5D returns.
Is There Any Correlation With Peer Earnings?
Occasionally, peer performance can influence post-earnings stock reactions. In fact, the pricing-in may start prior to the earnings announcement. Below is some historical data comparing the post-earnings performance of Honeywell International stock with the performance of peers that reported earnings just before Honeywell International. For a fair comparison, peer stock returns also represent post-earnings one-day (1D) returns.
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