PreMarket Prep Stock Of The Day: Estee Lauder

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

After-hours trading can be dangerous, especially on a Friday, when a company is due to report earnings Monday morning. That is the scenario behind the PreMarket Prep Stock Of The Day, Estee Lauder Co. EL.

Jumping The Gun: On many occasions, there will be a flurry of price action ahead of an earnings report in premarket or after-hours trading. Either traders think “they know something” about the report or are nervous about the current position and do not want to ride out it through the report.

So far, this earnings season has yielded more major beats than misses, and leaning long into several reports has been rewarded. Of course, the corresponding price action has been somewhat unpredictable.

The Set-Up: Dennis Dick, who does a majority of his short-term trading in the premarket and after-hours, identified a relentless buyer in Friday’s after-hours session. The buyer was either trying to cover a short or was banking on earnings beat for the report on Monday morning.

A few different factors went into taking the issue short into the report. The primary one? Not all companies that have beat have rewarded shareholders with higher prices. Also, the fact that the aggressive buyer was willing to pay over $10 from Friday’s close ($313.80) and nearly $7 above its all-time high ($318.34) last Thursday.

The aggressive buyer paid up to $324.45 in the after-hours session.

Buyers Remorse: It didn't take long for the buyer to take some heat on the purchase as the issue ended the after-hours session (8 p.m. ET) at $321.10. The retreat continued at the commencement of premarket trading as the issue $5 lower at $316.31 and continued to leak.

Earnings Beat, Sales Miss: Around 6:45 a.m. Monday, Estee Lauder reported quarterly earnings of $1.62 per share, which beat the analyst consensus estimate of $1.31. The company reported quarterly sales of $3.86 billion, which missed the analyst consensus estimate of $3.93 billion.

Look Out Below: The Street seized on the sales miss and traded below $300. After hovering about that level off the open, another round of large sellers came in and the issue has continued to make new lows for the session.

As of 3 p.m., $286.58 stands as the low for the session and is now attempting to rebound. Its next daily low comes in at $284.45 from March 26.

The discussion on the issue from Monday’s show can be found here: