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Crocs' Dismal Earnings Outlook Sends the Stock Lower

CROX remains stuck below its 50-week moving average

by 2/24/2012 10:30:44 AM
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Wrapping up a week chock-full of earnings releases, Crocs, Inc. (CROX - 18.93) took its turn in the earnings confessional after last night's close. For the fourth quarter, the plastic shoe concern reported a profit of $5.6 million, or 6 cents per share, an 18% improvement over last year's profit of $4.7 million, or 5 cents per share. Revenue was also on the rise, jumping 14% to $203.7 million. The results were mixed, with Wall Street calling for a per-share profit of 5 cents on $205.3 million in sales.

In the same vein as fellow footwear maker Deckers Outdoor (DECK), CROX provided a weak outlook for the current quarter, based on increasing costs for raw materials. The company is expecting a first-quarter profit of 24 cents to 26 cents per share, on $263 million to $268 million in revenue. Analysts, meanwhile, had put forth a more upbeat forecast for earnings of 30 cents per share on sales of $269 million.

With the stock sitting on a 38% year-to-date gain, sentiment was fairly optimistic leading up to last night's announcement. Zacks reports that four analysts maintain a "strong buy" recommendation toward CROX, compared to two tepid "hold" suggestions. Plus, Thomson Reuters pegs the average 12-month price target at $25 -- representing a 22% premium to yesterday's close of $20.42, and a neighborhood the equity has not visited since its previous post-guidance gap lower in mid-October.

Options players also maintained a bullish stance on CROX ahead of earnings. In addition to the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.53, showing that call open interest nearly doubles put open interest among options set to expire within the next three months, traders on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open more than six calls for every put during the past 50 sessions.

Price Chart of CROX with 60-Week Moving Average

Today's post-earnings pullback has CROX retreating from its looming 50-week moving average -- a former layer of support that has switched roles to serve as resistance.

Should this post-earnings slump continue, the glut of bulls surrounding the stock could provide CROX with some contrarian-related headwinds in the short term. In fact, the stock was downgraded just last week, opening the door for other skeptics to follow suit.

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