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Fox Factory Holding Corporation designs, engineers, and manufactures performance-defining products and systems worldwide. The company provides its products for high-end bicycles and a variety of powered vehicles including on-road, off-road, all-terrain, snowmobiles, and military trucks.
In addition, Fox offers lift kits and components, rear suspension products, tuning services, as well as wheels and accessories. The company also serves aftermarket products under brands such as BDS Suspension, Zone Offroad, JKS Manufacturing, FOX, and Marzocchi.
Amid an intensifying and competitive environment, Fox faces challenges with OEM partners reducing their demand forecasts, impacting revenue. The company anticipates ongoing pressure on demand in 2025 as a difficult retail environment is expected to linger.
The Zacks Rundown
Fox Factory Holdings FOXF, a Zacks Rank #5 (Strong Sell) stock, is a component of the Zacks Automotive – Domestic industry group, which currently ranks in the bottom 48% out of approximately 250 Zacks Ranked Industries. As such, we expect this industry group as a whole to underperform the market over the next 3 to 6 months.
Stocks in the bottom tiers of industries can often be intriguing short candidates. While individual stocks have the ability to outperform even when they’re part of a lagging industry, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much more difficult.
Along with many other automotive-related stocks, FOXF shares have been underperforming this year while the general market returned to new heights. The stock is hitting a series of lower lows and represents a compelling short opportunity as we approach the New Year.
In the latest quarter, Fox stated that both its biking and powered vehicle segments were weaker than anticipated as excess inventory among manufacturers was reduced. As we’ll see, the company reported earnings below expectations and lowered full-year EPS guidance.
Recent Earnings Misses & Deteriorating Outlook
Fox Factory Holdings has fallen short of earnings estimates in three of the past five quarters. Back in October, the company reported third-quarter earnings of 35 cents per share, missing the $0.42/share Zacks Consensus Estimate by -16.7%.
Fox’s gross margin decreased to 29.9% from 32.4% in the same period last year, driven by shifts in the product offering and reduced operating leverage. Net income for the quarter plunged to $4.8 million from $35.3 million during the year-ago period. Revenues of $359.12 million also missed the Zacks Consensus Estimate by -2.02%.