Why Is Crocs (CROX) Down 3.1% Since Last Earnings Report?

It has been about a month since the last earnings report for Crocs (CROX). Shares have lost about 3.1% in that time frame, underperforming the S&P 500.Will the recent negative trend continue leading up to its next earnings release, or is Crocs due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers. Crocs' Q3 Earnings Beat, HEYDUDE Brand's Revenues Fall 17.4% Y/YCrocs, Inc. posted solid results for third-quarter 2024, wherein the bottom and top lines surpassed the Zacks Consensus Estimate and grew year over year.Results gained from strength in the Crocs brand and outstanding international growth. With respect to the HEYDUDE brand, management has been making improvements to aid sustainable growth. In the quarter, Crocs launched TikTok Shop and has been receiving a positive response. In addition, clogs, sandals and personalization rose during the quarter, driven by the Classic Clog.Despite solid results in the third quarter, Crocs’ shares lost 19.2% in the trading hours yesterday. The company’s HEYDUDE brand didn’t perform well in the quarter. Moving forward, Crocs expects the consumer backdrop to be comparatively muted in the United States until the Black Friday/Cyber Monday holiday period. The company is seeing higher pullback within key Tier 1 cities such as Shanghai and Beijing. In light of the broader macro landscape in China, management is taking a more cautious approach for the balance of the year. Such limitations are likely to have hurt the consumers’ sentiments.An Insight Into Crocs’s Q3 PerformanceCrocs’ adjusted earnings of $3.60 per share beat the Zacks Consensus Estimate of $3.13 and rose 10.8% year over year. Consolidated revenues rose 1.6% year over year to $1,062.2 million and beat the consensus estimate of $1,051 million. On a constant-currency basis, revenues improved 2% year over year. The top line witnessed solid growth in the direct-to-consumer (DTC) channel. DTC revenues increased 4.4%, while wholesale revenues fell 1.4%. On a constant-currency basis, revenues jumped 4.6%, while wholesale revenues dipped 0.9%.The Crocs brand’s revenues grew 7.4% year over year to $858 million, including a 7.7% increase in DTC revenues and a 7.1% rise in wholesale revenues. DTC comparable sales for the Crocs brand rose 4.8%. The HEYDUDE brand’s revenues fell 17.4% year over year to $204 million. The decline was due to a 22.9% decline in wholesale revenues and a 9.3% decrease in DTC revenues. DTC comparable sales for the HEYDUDE brand fell 22.2%.Total revenues in North America were up 2.1% year over year to $491 million, while revenues in the International region climbed 15.5% to $367 million. Crocs saw notable growth in Australia, China, France and Germany. The company’s China business rose more than 20%, with nearly two-thirds of this growth led by the mono-brand partner stores.The adjusted gross profit rose 5.5% year over year to $633.3 million. The adjusted gross margin expanded 220 basis points (bps) to 59.6% on lower product costs and select international price rises. Adjusted selling, general and administrative (SG&A) expenses, as a percentage of revenues, increased 510 bps to 34.2%. Adjusted operating income tumbled 8.8% year over year to $270 million. The adjusted operating margin contracted 290 bps to 25.4% from the year-ago quarter.Financial DetailsThe company ended the quarter with cash and cash equivalents of $167.7 million, long-term borrowings of $1.4 million and stockholders’ equity of $1.7 billion. It had $559 million of borrowing capacity on its revolver.During the quarter, the company repaid $110 million of debt. Crocs repurchased roughly 1.1 million shares for $151 million. It had $549 million of share repurchase authorization available for future repurchases at the end of the third quarter.Capital expenditure was $51 million as of Sept. 30, 2024. The company anticipates capital expenditure to be in the range of $90-$100 million in 2024 related to the expansion of its distribution capabilities.GuidanceManagement has issued guidance for the fourth quarter. The company expects revenues in the range of flat to up slightly year over year at currency rates as at the end of the reported quarter.Crocs brand’s revenues are likely to grow 2% year over year, while HEYDUDE brand’s revenues are anticipated to fall in the band of 4-6%. For the fourth quarter, management expects the international growth rate to be below the year-to-date growth rate, owing to the ongoing regulatory pressures in India. This has been adversely affecting the company’s ability to cater to the demand. For North America, it projects a negative outlook, including expectations of a more choiceful consumer and timing of wholesale shipments between quarters. It anticipates Q4 DTC to be positive.Adjusted gross margins are likely to grow for the enterprise, with Crocs brand’s slightly up and HEYDUDE brand’s slightly down year over year. The company expects adjusted SG&A costs to be in the high-teen range for the quarter. Adjusted earnings are projected to be in the bracket of $2.20-$2.28 per share, with the adjusted operating margin likely to be 19.5%.For 2024, enterprise revenues are likely to grow about 3% year over year at currency rates at the end of the third quarter compared with the lower end of the earlier guided range of 3-5%. While revenues for the Crocs brand are expected to rise 8%, the metric for the HEYDUDE brand is anticipated to decline nearly 14.5% on weaker-than-expected sellouts across the wholesale and digital channels. Earlier, management had projected Crocs brand’s revenues to rise in the band of 7-9%, and HEYDUDE’s revenues to drop 8-10%.Crocs still forecasts an adjusted operating margin of more than 25% for 2024. The combined GAAP tax rate is still expected to be 21%, while the adjusted tax rate is likely to be 16%. Adjusted earnings per share are envisioned to be in the range of $12.82-$12.90, up from $10.92 recorded last year and $12.45-$12.90 guided earlier. This view does not assume any impact of share repurchases ahead. Lower-than-anticipated annual tax rate and higher share repurchases in the reported quarter aided earnings view.In 2025, management looks forward to invest in talent, marketing, digital and retail to boost sustainable growth, thereby putting higher pressure on EBIT margin. For Crocs, management projects revenue growth in 2025, backed by international strength. It expects stabilization of the HEYDUDE brand. Crocs anticipates the first quarter to be sequentially down from the fourth quarter with respect to the size of wholesale.How Have Estimates Been Moving Since Then?In the past month, investors have witnessed a downward trend in estimates revision.The consensus estimate has shifted -17.69% due to these changes.VGM ScoresCurrently, Crocs has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Crocs has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.Free: 5 Stocks to Buy As Infrastructure Spending SoarsTrillions of dollars in Federal funds have been earmarked to repair and upgrade America’s infrastructure. In addition to roads and bridges, this flood of cash will pour into AI data centers, renewable energy sources and more.In, you’ll discover 5 surprising stocks positioned to profit the most from the spending spree that’s just getting started in this space.Download How to Profit from the Trillion-Dollar Infrastructure Boom absolutely free today.Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Crocs, Inc. (CROX): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks