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Here's How Fossil (FOSL) Looks Just Ahead of Q3 Earnings

Zacks Equity Research

Fossil Group, Inc. FOSL is scheduled to release third-quarter 2019 results on Nov 6. This clothing and accessories designer and manufacturer delivered a positive bottom-line surprise of 42.9% in the last reported quarter.

The Zacks Consensus Estimate for third-quarter earnings has been stable over the past 30 days at 40 cents per share. Notably, this suggests a substantial increase from the year-ago period’s reported figure. However, the consensus mark for revenues is $569.2 million, indicating a drop of 6.5% from the figure reported in the year-ago quarter.

Fossil Group, Inc. Price and EPS Surprise

Fossil Group, Inc. Price and EPS Surprise

Fossil Group, Inc. price-eps-surprise | Fossil Group, Inc. Quote

Key Factors to Note

Fossil’s top-line performance is likely to reflect softness in the traditional watch category in the quarter under review. We note that the company has been witnessing soft sales in this category for a long time now due to increased competition and rising demand for tech-savvy watches. Further, sales of leathers and jewelry have persistently been weak since the last few quarters due to soft demand.

Though Fossil has been expanding its smartwatches and wearable portfolio, it seems unlikely that the categories have managed to offset the softness in the quarter under review. Persistence of such headwinds along with several business and licensed brand exits and currency woes is likely to show on Fossil’s top-line performance in the third quarter. In the last earnings call, management guided a 6-13% decline in net sales for the third quarter, reflecting a 2.5% adverse impact from business exits and around 1.8% from unfavorable currency movements.

Nonetheless, the company’s bottom line is likely to have benefited from its New World Fossil plan, which is focused on fueling efficiencies, improving margins and enhancing the overall operating structure to drive profitability. As part of this transformation plan, Fossil has been committed toward prioritizing revenue optimization, delivering gross margin and achieving productivity savings. We believe this savings initiative to have lent support to Fossil’s earnings in the third quarter.
What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Fossil this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Fossil has an Earnings ESP of 0.00% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With Favorable Combination

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

Foot Locker FL has an Earnings ESP of +2.80% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Home Depot HD has an Earnings ESP of +0.23% and Zacks Rank #2.

Lowe’s Companies LOW has an Earnings ESP of +1.25% and a Zacks Rank #2.

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