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Piper Jaffray Upgrades Fossil Group to ‘Neutral’

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Price movement

Fossil Group (FOSL) has a market cap of $1.7 billion. It rose 2.7% to close at $35.24 per share on November 21, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 4.5%, 24.1%, and -3.6%, respectively, on the day.

FOSL is trading 20.2% above its 20-day moving average, 22.7% above its 50-day moving average, and 5.1% above its 200-day moving average.

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Related ETF and peers

The Schwab US Mid-Cap ETF (SCHM) invests 0.05% of its holdings in Fossil Group. The YTD price movement of SCHM was 12.4% on November 21.

The market caps of Fossil’s competitors are as follows:

  • Coach (COH) — $10.7 billion
  • Kate Spade Company (KATE) — $2.2 billion
  • Guess? (GES) — $1.4 billion

Fossil Group’s rating

On November 21, 2016, Piper Jaffray upgraded Fossil Group’s rating to “neutral” from “underweight.” It also increased the stock’s price target to $32.0 from $23.0 per share.

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Performance of Fossil Group in 3Q16

Fossil Group reported 3Q16 net sales of $738.0 million, a fall of 4.3% compared to its net sales of $771.3 million in 3Q15. Sales of the company’s Americas and Europe business segments fell 7.7% and 6.6%, respectively, and sales of its Asia business segment rose 11.5% in 3Q16 compared to 3Q15.

The company’s gross profit margin and operating margin contracted 200 basis points and 560 basis points, respectively, in 3Q16 compared to 3Q15.

Its net income and EPS (earnings per share) fell to $17.4 million and $0.36, respectively, in 3Q16, compared to $57.5 million and $1.19, respectively, in 3Q15.

Fossil Group’s cash and cash equivalents fell 18.4%, and its inventories rose 11.9% in 3Q16 compared to 4Q15. Its current ratio rose to 3.3x, and its debt-to-equity ratio fell to 1.3x in 3Q16, compared to its current and debt-to-equity ratios of 2.9x and 1.5x, respectively, in 4Q15.

Projections

Fossil Group has made the following projections for 4Q16:

  • net sales growth of -2.0%–4.0%
  • operating margin of 5.8%–8.5%
  • EPS of $0.69–$1.19

The company has made the following projections for 2016:

  • net sales growth of -5.0% to -3.0%
  • operating margin of 4.0%–5.0%
  • EPS of $1.30–$1.80

In the next article, we’ll take a look at Foot Locker (FL).

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