A review of how short sellers are positioning themselves ahead of earnings announcements in the coming week.

• Atwood Oceanics the most shored company announcing earnings this week
• Deutsche Lufthansa has an all-time high demand to short its shares in the lead-up to results
• Japanese photography see heavy short interest leading up to earnings

North America

Atwood Oceanics sees the highest short interest of any company announcing earnings next week with over a third of its shares now shorted. The firms leads the way in the energy sector which shares top billing in the most shorted list along with Pharmaceutical and Biotech.

Atwood's position as an offshore drilling contractor has made it particularly exposed to the recent deep cuts in energy capital spending, something which was a key theme in this last weeks' earnings announcements from oil majors. This trend has in turn seen short sellers hang on to their positions in Atwood despite the fact that its shares have rebounded strongly from the lows seen earlier in the year. Short sellers are lining up for a further slide in Atwood shares heading into earnings as its short interest has increased by 18% in the month leading up to earnings.

Hornbeck Offshore, which is exposed to the same forces driving Atwood's short interest, sees 20.2% of its shares shorted.

The high conviction shorts in the production and exploration space announcing earnings next week are Bonanza Creek Energy, Stone Energy and Northern Oil & Gas.

Short selling in the pharma sector is led by Ligand Pharmaceutical which sees 28% of its shares shorted. The great majority of this shorting activity is unlikely to be driven by directional short selling however as Ligand has several large convertible bond issues outstanding.

The same can't be said for Heron Therapeutics however. The firm, which is not expected to earn any revenue until Q3 this year has, 23.5% of its shares shorted.

Financial firms also make an appearance among high conviction sort positions with Encore Capital Group and Bofi Holding taking second and third spot among the most shorted ahead of earnings list.

Europe

Most shorted European company announcing earnings this week is German legacy airline Deutsche Lufthansa which has an all-time high 17.3% of its shares shorted. All three large European legacy carriers, which were under pressure from upstart Asian carriers and low-cost domestic competitors, have had to contend with the added uncertainty following the brexit vote and the fallout from recent terrorist attacks which has put off some travellers.

The largest rise in short interest leading up to earnings comes compliment of German car parts manufacturer ElringKlinger which has seen a 39% rise in short interest in the last month. The firm's formal earnings announcement isn't likely to provide many shocks however as it has already put out preliminary earnings which drove much of the recent increase in shorting activity.

Luxury firms, which have been hit by a slowdown in Asian luxury consumer spending also feature in the most shored firms announcing earnings next week with Hugo Boss and Salvatore Ferragamo both seeing more than 6% of their shares shorted in the lead-up to earnings,

One bright spot heading into earnings is UK plant rental firm Aggreko which has seen over 16% of short positions cover in the last month. The latest wave of short covering takes the company's short interest to a new yearly. This is most likely driven by the fact that the firm has a relatively large overseas exposure which has helped to cushion it from the worst of the recent brexit driven volatility.

Apac

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Future Venture Capital is the most shorted Asian firm announcing earnings this week with 21% of its shares shorted.

Japan's leading photography firms continue to make popular short positions with camera manufacturer Nikon and lens firm Tamron both making this week's heavily shorted list.

The largest jump in short interest leading up to earnings was driven by mobile app firm Klab which has seen shorts surge by nearly a third in the last month to 15.5% of shares outstanding.

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This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.