The industrials sector endured a terrible time relative to the broader market from early 2018 until the Covid lows of March 2020. These economically sensitive stocks tend to do best when there is optimism about prospects for future growth around the world. macro-landscape. That doesn’t seem to describe the current situation, but I do spot green shoots with Industrial versus the S&P 500.
The SPDR Industrial Select Sector ETF (XLI) is near its highest relative level in over a year. Investors should watch the XLI:SPY relative chart for clues to the market, which is generally running ahead of the economy. A small engineering company has a troubled past and announces results earlier this week.
Industrialists rally against SPY
According to CFRA Research, Matrix Service Company (NASDAQ: MTRX) provides engineering, manufacturing, infrastructure, construction and maintenance services primarily to the oil, gas, power, petrochemical, industrial, agricultural, mining markets and minerals in the United States, Canada, South Korea, Australia and internationally.
According The Wall Street Journal, and has a poor EPS beat rate history. Remarkably, the company has missed consensus earnings forecasts in each of the previous 11 quarters. So it’s hard to expect any good things to be announced later this week.
Matrix: a history of miserable win beat rates
When evaluating, Seeking Alpha evaluates the title with a A+, but there are relatively few consistent measurements to confirm this. I notice, however, that MTRX’s futures price-to-sales ratio is at an all-time low. This suggests that there is a high degree of pessimism in the stock price. At less than 0.2 times next year’s sales, that’s about half the average valuation.
MTRX: historical forward price-to-sales ratio
According to corporate events data from Wall Street Horizon, Matrix confirmed the AMC fourth quarter 2022 earnings date on Monday, Sept. 12 with an earnings conference call to follow Tuesday morning. You can listen live here. Its Q1 2023 release is scheduled for Monday, November 7 AMC.
Matrix: Corporate Events Calendar
The angle of options
With an abysmal earnings beat rate history and low price valuation relative to sells, what does the options market say about what might happen Monday night and Tuesday after earnings? Traders see a big move in the stock price of 14.8% using the nearest pair straddle. The consensus EPS forecast, according to data from Option Research & Technology Services (ORATS), is for a loss of $0.30 per share. Last quarter, the stock rose more than 16% after the company’s earnings release.
The price of options in a big swing in stock prices on Tuesday
The technical grip
MTRX is in a clear downtrend. There are also a large number of stocks trading in the $6-$7 range – this is a bearish overhead bid. Thus, there is a confluence of resistance which sits just above the current price action. However, MTRX is trending higher from its low of less than $5 in early July. Note that the recent high above $6 was quickly sold off – these were the range lows in late 2021 and early 2022.
Overall, the trend is bearish and there is obvious resistance above the stock price. I would wait for a bullish break above $7.50 before going long.
MTRX: Downtrend, Stock Supply Overhead
Investors should avoid Matrix ahead of Monday’s results. A bearish price trend replaces a low valuation in this case. Additionally, the company’s incredibly poor EPS beat rate history portends bad news on Monday night. Options market prices in a big swing, and I think it will be down.