Bear of the Day: Crocs (CROX)
The consumer has come back strongly this year, as housing prices and confidence have rebounded. This has helped many discretionary stocks to soar in 2013 and many believe this can continue if current trends in the market hold up.
Yet while the sector outlook might be very promising, not all companies look to ride this wave higher. In particular, Crocs (CROX) could be one company that misses out on this consumer boom, and gives back some of its gains from earlier in the year.
Crocs in Focus
Crocs is a Colorado-based company, best known for its unique footwear, although the company also makes a number of accessories as well. While its shoes might be ubiquitous, the firm isn’t exactly in a number of portfolios as it has a market cap of less than $1.5 billion and is well within the small cap range.
Arguably, the best days are long past for this once high flying company, as the stock was once at $35/share, roughly double its current share price. It appears as if the trend has passed Crocs by and that investors have moved on to other names in the broad consumer market that are still ‘in’.
Analysts seem to agree with this assessment too, as expected earnings growth comes in slightly negative for the full year period. This includes a roughly -20% EPS growth rate for the next quarter time frame, and a --0.3% for 2013.
Furthermore, pretty much all analysts are in agreement on this poor story, as all have lowered their estimates in the past sixty days for both the current quarter and current year figures. The overall consensus has also declined significantly as a result of these revisions, suggesting that it isn’t looking good for Crocs in either the near term or longer time periods.
Thanks to this, Crocs currently has a dreaded Zacks Rank of 5 or Strong Sell, meaning that it is likely to underperform other stocks in the next one to three month period. The stock also has an ‘Underperform’ Zacks Recommendation, meaning that the outlook isn’t any better for longer time periods, and that investors should stay far away from this company’s stock.
Better Choices?
Instead of the lowly-ranked Crocs, investors would be wise to consider any number of highly-ranked names in the consumer space. There are even plenty in the same industry of textile-apparel, so there should be no shortage of choices.
In particular, investors might want to consider the top Ranked Hanesbrands (HBI) for exposure. This stock has moved from a Zacks Rank of 2 to a Zacks Rank of 1 in the past week, and its double digit earnings growth projection for this year suggests that it might be a better way to play a surging consumer than the floundering Crocs.
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