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Things You Need to Know Before Crocs' (CROX) Q3 Earnings

Zacks Equity Research

Crocs, Inc. CROX is scheduled to release third-quarter 2019 results on Oct 30. This Colorado-based company surpassed the Zacks Consensus Estimate for earnings by a wide margin in each of the trailing four quarters.

The Zacks Consensus Estimate for its third-quarter earnings is pegged at 41 cents, suggesting a substantial improvement from 7 cents reported in the year-ago period. Notably, the Zacks Consensus Estimate has remained unchanged in the past 30 days. The consensus estimate for revenues is pegged at $302.6 million, indicating an increase of approximately 15.9% from the prior-year quarter’s reported figure. 

Crocs, Inc. Price and EPS Surprise

Crocs, Inc. Price and EPS Surprise

Crocs, Inc. price-eps-surprise | Crocs, Inc. Quote

Factors to Consider

Crocs’ international collaborations and marketing investments as well as favorable response to product categories such as clogs, sandals and visible comfort technology are likely to have contributed to the top-line performance. The company’s e-commerce business has been improving at a double-digit rate for quite some time now, a trend which is most likely to have sustained in the third quarter.

The company at its last earnings call projected the second half of the year to witness growth, particularly in North America. Also, it expects third-quarter revenues to be $295-$305 million, whereas it reported $261.1 million in the year-ago period. Management highlighted that the projection takes into account an estimated loss of approximately $2 million due to adverse currency and $3 million, owing to lower store count.

Adjusted gross margin is likely to have contracted roughly 180 basis points to approximately 51.5% in the third quarter. Management informed that lower purchasing power due to strong US dollar is expected to have accounted for approximately 150 basis points of the decline and the remaining have been due to increased freight and distribution costs. Crocs also hinted that wholesale business carries a lower gross margin. Notably, the company envisions SG&A expense contraction of 790 basis points to account for 40% of revenues.

Zacks Model

Our proven model does not conclusively predict an earnings beat for Crocs 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Although Crocs carries a Zacks Rank #1, its Earnings ESP of -2.44% makes surprise prediction difficult.

Stocks Poised to Beat Earnings Estimates

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

Deckers Outdoor Corporation DECK has an Earnings ESP of +4.49%. It currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

lululemon athlectica LULU presently has an Earnings ESP of +1.08% and a Zacks Rank #2.

Carter’s CRI currently has an Earnings ESP of +0.83% and a Zacks Rank #3.

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lululemon athletica inc. (LULU) : Free Stock Analysis Report
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