Chewy (NYSE:CHWY) is expected to release its earnings around June 11. Chewy offers food and supplies for a range of pets and is also involved in emerging pet industry sectors such as personalized products, pet insurance, and pet telehealth, with a market capitalization of $19 billion. Consensus forecasts indicate revenues near $3.08 billion for the quarter, reflecting an increase of approximately 7% compared to the previous year, while earnings are anticipated to be around $0.34 per share. Separately, is it Time To Buy Amazon Stock?
This growth is likely fueled by an expanding customer base relative to last year, along with an increased adoption of Chewy’s Autoship subscription service, which enables customers to arrange for regular deliveries of pet supplies. Over the past twelve months, revenue reached $12 billion, and the company was operationally profitable, generating $113 million in operating profits and a net income of $393 million. However, for those seeking upside potential with reduced volatility than individual stocks, the Trefis High Quality portfolio offers an alternative, having surpassed the S&P 500 and achieved returns exceeding 91% since its inception.
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Chewy’s Historical Odds Of Positive Post-Earnings Return
Here are some observations on one-day (1D) post-earnings returns:
- There are 18 earnings data points recorded over the last five years, with 5 positive and 13 negative one-day (1D) returns recorded. In summary, positive 1D returns occurred roughly 28% of the time.
- Interestingly, this percentage rises to 36% when considering data from the last 3 years instead of 5.
- Median of the 5 positive returns = 11%, while median of the 13 negative returns = -8.1%
Additional information on observed 5-Day (5D) and 21-Day (21D) returns after earnings is compiled along with statistics in the table below.
Correlation Between 1D, 5D, and 21D Historical Returns
A relatively lower-risk approach (though ineffective if the correlation is low) involves evaluating the correlation between short-term and medium-term returns following earnings, identifying a pair with the highest correlation, and executing the appropriate trade. For example, if 1D and 5D exhibit the strongest correlation, a trader can position themselves “long” for the next 5 days assuming the 1D post-earnings return is positive. Below is some correlation data based on a 5-year and a 3-year (more recent) history. Note that the correlation 1D_5D refers to the relationship between 1D post-earnings returns and the subsequent 5D returns.
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