Event Data Outlook, May 17 - Volatility has re-entered the scene for global investors with inflationary concerns in the headlines

Executive Summary

Volatility has re-entered the scene for global investors with inflationary concerns in the headlines. The implications for international firms include the challenge of passing on higher costs to consumers. For investors, it becomes even more important to be aware of corporate events and unusual company-specific news that will drive stock price action. Expect executives to turn their focus away from the pandemic and toward fundamental risks such as supply shortages, rising interest rates, and inflation.

Earnings Outlier

We feature one company as an earnings outlier this week.

Pieris Pharmaceuticals (PIRS) is a Massachusetts-based biotechnology microcap in the Healthcare sector. The stock has hit the skids recently with its share price falling to 52-week lows this month. Trailing twelve-month earnings are $-0.68 and it does not pay a dividend. Investors are wringing their hands in the search for some good news. For background, Pieris is a clinical-stage biotech firm that discovers and develops Anticalin-based drugs to target validated disease pathways in transformative ways.

Drug Product License

On April 26, PIRS and Boston Pharmaceuticals announced that the companies entered into an exclusive product license agreement to develop the drug known as PRS-342.* PIRS is to receive an up-front $10 million payment and is entitled to receive up to approximately $353 million in milestone payments and tiered royalties ties to sales of the drug.

Price Action

Following the April 26 news, the stock saw a small uptick in volume and the share price rallied above $2.40, but gains evaporated the next day. Earlier in April, PIRS dropped sharply after a press release regarding PRS-343.** Like many biotech plays, traders often live and die by each key clinical study and news item regarding the status of a key drug. Our outlier analysis shows a later than usual earnings date which could be a red flag for traders given recent drug development and partnership news.

Outlier Analysis

PIRS has a history of reporting Q1 results between May 10 and May 11, with no day of the week trend.

• March 31 - Wall Street Horizon set an Inferred Q1 earnings date of May 10 Before Market for PIRS based on its reporting trends.
• May 10 - PIRS issued a morning press release stating Q1 results would be released on May 17 Before Market. This change created a high Z-score of 4.39.

Figure 1: PIRS Stock Price History (1-year)***

Wall Street Horizon Z-score: statistical measurement of how an earnings date (confirmed or revised) compares to the reporting company's 5-year trend for the same quarter. This metric is included in our DateBreaks product, learn more.

Earnings Date Revisions

Two Argentinian banks within the Financials sector are featured this week with important earnings date revisions, one a microcap and the other a small cap. Non-US banks are often some of the biggest beneficiaries of rising interest rates around the globe and could be plays on the shift from growth to value, but inflation is a critical concern. Investors know that Argentina is among the riskiest investable countries around the world. These two banks feature depressed stock prices and challenging operating environments. Perhaps as a sign of the tough market, both firms delayed their earnings reports to later in the month.

Grupo Supervielle (SUPV, SUPV.AR) is a holding company and performs banking services. SUPV is a national private financial group founded in 1887.**** Business operations focus on providing banking services to individuals and small to medium-sized companies. Recently, the bank has become quite profitable with Q4 2020 net income of 938 million***** (ARS) which was above the Bank of America Global Research estimate. Argentina was hampered by strict lockdown measures at times since early 2020, so management is optimistic that 2021 will provide better opportunities. Even during the COVID environment, the bank maintained net income for 2020 of 3,412 ARS, a drop of just 20% from 2019.

Price Action

 Take a look at Figure 1 below. Undoubtedly what jumps out is the massive price and volume spike on February 18, 2021. What was going on? Takeover rumors. The stock popped more than 50%, then settled off the high of the day, as rumors floated that the bank would be bought out by an unknown bidder. The rumors were apparently false, and SUPV has since fallen back near 52-week lows. These huge price swings are not uncommon for emerging market microcaps.

Revision Analysis

• April 14 - SUPV updated their Investor Website stating the Q1 2021 results would be released May 17 After Market.
• May 7 - The bank subsequently updated their Investor Website stating the Q1 2021 results would be released May 27 After Market.
• Investors should be on guard for unusual information given the revision and considering the takeover rumors earlier this year.

Figure 2: SUPV Stock Price History (1-year)******

Grupo Financiero Galicia SA (GGAL, GFG,AR) is a holding company engaging in banking services in Argentina, founded in 1999.******* The stock trades on the Buenos Aires Stock Exchange and the NASDAQ as an American Depository Share (ADS). The firm reported a 3.2 billion (ARS) decline in comprehensive net income for Q4 2020, which was a 40% decline from Q3, though it was also a 26% year-on-year gain. Higher inflationary pressures hurt profitability, according to Bank of America Global Research. On the positive side, the bank showed positive net interest income trends and real loan growth. Key to any bank, the net interest margin expanded to 10.1%. Looking forward, inflation and a slow economic recovery following the pandemic remain concerns for GGAL.

Price Action

GGAL has been somewhat stable over the last six months with a price range of $7.00 to $9.40. Volume has also been muted during that timeframe. Could the next significant volatility catalyst come during the upcoming earnings report? It is possible considering the earnings date revision to later in the month.

Revision Analysis

• April 14 - WSH received an email from GGAL stating Q1 results would be released May 18 After Market.
• May 5 - WSH received a subsequent email from GGAL stating the Q1 2021 results would be released May 26 After Market.
• This significant delay in the release of the Q1 2021 earnings report is another warning signal for investors. Interestingly, there was an accounting rule change back in 2019 due to the nation’s hyperinflation.******** 
• With the cost of goods rising around the world, investors should be aware of potential regulatory and political risks when trading in emerging market equities.

Figure 3: GGAL Stock Price History (1-year)*********

Conclusion

Volatility is back in the scene for global investors. Inflationary concerns make the evening news and appear on the front page of major publications. The implications for international businesses include the challenge of passing on higher costs to consumers. For investors, it becomes all the more important to keep abreast of corporate events and atypical company-specific news that will drive stock price action. Expect corporate leaders to turn their focus away from Covid and toward fundamental risks such as supply shortages, rising interest rates, and inflation.

*https://ir.pieris.com/press-releases/detail/657/pieris-pharmaceuticals-presents-updated-phase-1-monotherapy
**https://ir.pieris.com/press-releases/detail/657/pieris-pharmaceuticals-presents-updated-phase-1-monotherapy
***https://stockcharts.com/h-sc/ui?s=_PIRS&p=D&yr=1&mn=0&dy=0&id=p55986116612
****https://www.gruposupervielle.com/English/Our-Company/About-Us/default.aspx
*****https://www.wsj.com/market-data/quotes/SUPV/financials/annual/income-statement
******https://stockcharts.com/h-sc/ui?s=_GGAL&p=D&yr=1&mn=0&dy=0&id=p15975531892
*******https://www.wsj.com/market-data/quotes/GGAL/company-people
********https://www.wsj.com/articles/argentine-banks-stumble-in-adoption-of-new-accounting-standard-11561368600
*********https://stockcharts.com/h-sc/ui?s=_SUPV&p=D&yr=1&mn=0&dy=0&id=p46871698749