“What a Crock” Say Traders Over Earnings Report (CROX)

A good pair of hard-soled shoes sure comes in handy when the road turns rocky, or at least that may be the thought of investors looking at the latest earnings release from Crocs (NASDAQ: CROX). The maker of the colorful rubber shoes reported third-quarter earnings after the close of the market yesterday. The report and fourth quarter guidance contained a boot full of disappointment. For the quarter, Crocs showed a profit of $0.49 per share, which beat the forecast from analysts by 6 cents. Revenues, however, came in shy of expectations ($295.6 million versus the consensus view of $302.4 million). A little over a month ago in a conference call with analysts, the company reaffirmed its fiscal year 2012 guidance.

Perhaps the biggest miss came when the company talked about the next quarter. The company said it now expects to breakeven on a per share basis in the fourth quarter on revenues of $220 million. Analysts had prognosticated Crocs to earn $0.10 per share on revenues of $234 million. John McCarvel, CEO of Crocs, cited the economy and a weak Euro as the reason for the gloomier outlook.

Several analysts took the statements as a cue to readjust their forecasts and ratings. Stern Agee downgraded Crocs from a “buy” to a “hold”. Meanwhile, Piper Jaffray maintained its “overweight” rating on the stock while cutting the price target from $29.00 to $22.00.

Investors and traders also took it as a signal to stomp their way out of the stock. Shares of Crocs gapped down $2.28 from the closing price on Wednesday to open the session at $13.91. A brief rally after the start of the market sent the stock to its high of the day when shares traded for $14.04. Sellers then resumed running for the exits and shares prices continued to decline through the morning, setting a fresh 12-month low of $12.61. Volume in the first few hours of the trading session outpaced the average daily volume by a ratio of nearly 10 to 1. When the closing bell rang, the stock finished with a loss of 21% on the day to close down $3.43 at $12.76. The number of shares exchanging hands totaled more than 16 million, which made the session one of the heaviest trading days in Crocs shares over the last year. On an average day, the stock trades 1.38 million shares.

Over the last 12 months, Crocs has taken shareholders and traders on a roller coaster ride. Despite the warning of earnings falling below guidance in February, the stock climbed nearly 50% from the beginning of the year through April to a 52-week high of $22.59. Another warning issued in late April triggered investors to dump their shares over the next three months and share prices hit a new annual low of $13.80. The stock then bounced for a 22% gain after the company shared its guidance for the third quarter. Traders and investors will have to decide whether today marked the bottom of the cycle or the start of an ugly phase.

Before this morning, five out of nine analysts covering the company had a “buy” rating on the stock. The average price target placed on Crocs shares by the consensus is $23.86.

Crocs manufactures and distributes footwear and accessories for all age groups. The Niwot, Colorado-based company was founded in 1999.

 

 

 

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Published by Alan Masterson

Alan has over 25 years of trading experience in the U.S. equity markets. He began his career in finance working on a program trading desk specializing in over-the-counter stocks. His career progressed from that point to his current position as senior trader on an institutional trading desk. In the evenings, Alan teaches economics at a local community college. He has contributed articles to various publications over the last six years, including feature articles for an economics magazine and various financial blogs. You may contact Alan via his email (alanmasterson@wallstreetpr.com) or his Google+ page (https://plus.google.com/103338576216002376250).

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