Fossil (FOSL) Earnings Coming Up: Time For A Rebound?

Fossil (FOSL) is set to report fourth quarter fiscal 2016 results after the closing bell this afternoon. Although revenue and profits have been hard to come by amid increased competition from the likes of Apple (AAPL), there’s still a lot to love with FOSL stock on this Valentine’s Day.

Though best known for its watches, the Texas-based company also makes jewelry, handbags, small leather goods, belts, sunglasses and a host of apparel. Not only has the company beaten Wall Street’s earnings estimates in two straight quarter, Fossil has missed just once in the past eight quarters. And with a possible beat Tuesday and upbeat guidance, Fossil, which has seen its shares decline some 30% over the past year, could be on a verge of a recovery.

For the three months that ended December, Wall Street’s expect Fossil to earn $1.20 per share on revenue of $977.13 million. This compares to the year-ago quarter when the company earned $1.46 per share on $992.5 million in revenue. For the full year, earnings are projected to be $1.92 per share, while revenue of $3.06 billion would decline 3% year over year.

During third quarter, Fossil reported net income of $17.4 million, or 36 cents per share, down from $57.5 million for the third quarter of fiscal 2015. While citing a challenging environment for the traditional watch category, the company lowered its fiscal 2016 outlook. But Fossil, which currently operates 600 stores in 150 countries, has begun to restructure the business to achieve not only greater profitability, but also to speed up product innovation, which has been a main driver in the company’s growth.

In that regard, as part of efforts to fast-track new products, the company in October unveiled some forty hybrid smartwatches. Fossil at the time said the new products would not only help it fight off competition to gain market share, but could also help boost profit margins from price increases. Combined with the company’s plan to emerge leaner from store closures, FOSL stock, which closed Monday at $22.98 looks like a relative bargain.

The stock is priced at just 13 times fiscal 2017 estimates $1.78 per share, which is about six points below the S&P 500 index. Yet those estimates don’t yet factor the company’s ability — amid its restructuring — to become more agile and respond more quickly to changing markets. As such, from a risk versus reward perspective, Fossil, which now trades near 52-week lows, is a stock to keep an eye on for the next 12 to 18 months. With a bit of luck these shares can shoot up to $28, delivering 22% returns.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Richard Saintvilus

After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.

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