Bull of the Day: Crocs (CROX) – May 21, 2019

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Crocs, Inc. (CROX Free Report) are trendy again. This Zacks Rank #1 (Strong Buy) recently beat on earnings for the fifth straight quarter.

Crocs sells casual footwear for men, women and children through its website and retail stores. It operates 372 stores globally. The vast majority of the shoes within the Crocs collection contains Croslite material, a proprietary, molded footwear technology.

Another Beat in the First Quarter of 2019

On May 7, Crocs reported its first quarter 2019 results and beat the Zacks Consensus Estimate for the fifth time in a row.

Earnings were $0.36 versus the Zacks Consensus of just $0.25. That’s a beat of 44%.

Revenue jumped 4.5% to $295.9 million while retail comparable store sales rose 8.7% and e-commerce revenue grew 16.5%.

The Americas saw the best same-store-sales results, jumping 12.4% on top of a great comp in 2018’s first quarter of 10.9%.

The weakest region was Asia Pacific which saw a decline of 0.4% after seeing a gain of 4.7% the year before.

Gross margin came in at 46.5%, above the company’s guidance of 45.5%. However, that was lower than a year ago as it relocated its Americas distribution center which reduced gross margin by 40 basis points. Freight costs also impacted.

It continues to close stores. In the quarter, it shut 11 stores bringing its total down to 372 from 383.

Increased the Share Buyback Program

Crocs was already in the midst of a $500 million share buyback program of which it had $102 million remaining. It bought back $53.5 million in the first quarter.

However, the board authorized an additional $500 million program which leaves the company with about $600 million available for future repurchases.

Reaffirmed Full Year Guidance

Crocs kept its bullish outlook for the year.

It still sees revenue growth between 5% and 7% over 2018 revenue which was $1,088.2 million.

Revenue will be negatively impacted by about $20 million due to store closures and an additional $25 million due to currency changes.

Gross margins are still forecast to be 49.5%, down from 51.5% in 2018, however.

Analysts like what they heard as 2 estimates were raised for the full year and 2020 since the report.

The 2019 Zacks Consensus Estimate rose to $1.25 from $1.12, which is earnings growth of 45% as the company made $0.86 in 2018.

The 2020 Zacks Consensus jumped to $1.35 from $1.29 during the same period. That’s another 8.7% earnings growth.

Shares Fall: Is it a Buying Opportunity?

Even with a solid quarter, Crocs shares took a dive in May, possibly due to tariff fears.

The shares are now down 14% year-to-date.

However, they’re cheaper than before with a forward P/E of 17.8.

Many of the shoe manufacturers such as Nike (NKE Free Report) and Adidas (ADDYY Free Report) are banding together to plead with the White House not to put the tariffs on footwear on the next batch of $300 billion in products. This remains uncertain going into the summer.

For investors looking for a footwear retailer to add to their portfolio, and who aren’t afraid of the tariffs, then Crocs is one to keep on the short list.

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2019-05-21 10:13:00

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