This Week's Earnings Focus: FOSL, CROX, KALU, STP, GRMN

This week has more of a focus on steel companies and gold companies. For steel companies there is Kaiser Aluminum (KALU) Tuesday, RTI International Metals (RTI) Tuesday, Reliance Steel & Aluminum (RS) Thursday, and Cleveland-Cliffs (CLF) on Thursday. For gold companies there is Agnico-Eagle Mines (AEM) Wednesday, Barrick Gold (ABX) Thurs, and Newmont Mining Corp. (NEM) Thurs.

It will be very interesting to listen to the conference calls and the forward guidance to see how gold companies feel about prospects going forward with gold prices hovering near 52 week highs. For the gold producers, I will be listening to how, or if, the companies are hedging their gold price exposures and their outlook for gold prices for the year and how they will effectively manage their inventories and reserves. For the steel companies, I will be listening to forward guidance and the outlook on product demand, the outlook on steel prices as well as how commodity prices will affect their businesses going forward. Now on to the more interesting earnings reports coming out this week.

Freakin' Fossil

Fossil (FOSL) is a secret. You think watches, I think product portfolio. Fossil, Inc. engages in the design, development, marketing, and distribution of fashion accessories, including apparel, belts, handbags, jewelry, small leather goods, sunglasses, and watches under proprietary and licensed brand names worldwide.

The company offers a line of fashion watches under its proprietary brands, such as FOSSIL, MICHELE, RELIC, and ZODIAC; and pursuant to license agreements, under some prestigious brands, such as ADIDAS, BURBERRY, DIESEL, DKNY, EMPORIO ARMANI, MARC BY MARC JACOBS, and MICHAEL-Michael Kors.

It also designs, markets, and arranges for the manufacture of watches and accessories on behalf of certain mass market retailers, companies, and organizations as private label products or as premium and incentive items for use in various corporate events. The company offers a line of fashion accessories for both men and women, including handbags, belts, small leather goods, jewelry, and sunglasses under FOSSIL, EMPORIO ARMANI, DIESEL, MICHELE, and RELIC brand names through department stores and specialty retail stores, as well as over the Internet and through catalogs.

Fossil also offers apparel, including outerwear, tops, bottoms, and t-shirts for both men and women, through company-owned stores located in malls and retail locations in the United States. You didn't know that they make all these products did you?

Fossil is a global story, an international player, you know what that means. Popularity, revenue and favorable currency exchanges. How many of these brands do you see everyday? How many of these products have you bought spilled into the FOSL coffers without you knowing? FOSL announces earnings on Tuesday morning and I am in it with a hedged strangle overweight long, dollar weighted. This Christmas should have been a banner season for FOSL as shoppers tended to buy accessories due to the ease of gifting and lower price points. FOSL as well as Uggs for DECK and iMacs, iPhones for Apple (AAPL) were the rage this holiday season.

FOSL is expected to bring in $0.67 EPS and $449.87 million in revenues. High estimates are for $0.69 EPS and $452 million in revenues. I do expect them to beat the top and bottom line. They have beaten four out of the last four quarters. After the last earnings report, the shares gapped and ran from the previous day's low almost 9 points over 2 days about 25%. The reason for the gap and run comes from their fairly small float at 46 million shares and about 4.64 million shares short with a nice 6.7 short ratio.

On the technical front, they have been trading down since the start of the year and are back to levels they were at before their last earnings report. It should be a volatile mover after the numbers are released. Here are some analyst thoughts and comments:

On Feb. 13th, Morgan Keegan added FOSL to their Focus List saying they find the shares attractively valued and sees potential upside to Q4 estimates. On Feb. 5th, FOSL was upgraded to Buy and added to their Alpha List as they see near-term trading opportunity around Q4 results saying they expect to be a "beat and raise" quarter and find the valuation inexpensive. On Jan 17th, FOSL also announced that they were set to enter India.

Crazy CROX

Crocs (CROX) has earnings after the bell on Tuesday. They are expected to bring in $0.44 EPS with $207.66 million in revenues. High estimates are for $0.45 EPS and $211.44 million in revenues. They have beat four out of the last four quarters but its shares have been beaten down since reaching $75 in early November on earnings by missing their consensus revenue, issuing in line forward guidance on EPS and issuing softer forward guidance on revenues.

I do expect them to beat their numbers but are unsure of forward guidance. I do know it should be volatile after and possibly before and options pricing is calculating a $7 move after earnings. I am leaning towards an even weighted strangle going into earnings, possibly slightly overweight long. Here are some analyst comments:

On Feb 14th, JP Morgan recommends being long into the quarter as their store checks remain positive and believe better than expected Q1 guidance could lead to a short squeeze. They reiterate an Overweight rating. On the same day, Piper said that bookings remain solid, reiterate Buy after visiting the company's MAGIC tradeshow booth with a $82 target. On Feb. 12th, Wedbush lowered their price target to $45 from $70 but reiterate Strong Buy saying they expect to hear positive spring selling comments but lowered their target to reflect more realistic market multiples.

On Feb. 5th, Oppenheimer Funds lowered their passive stake in CROX from 8.8% to 0.18%.On Feb. 1st, Piper noted that according to Sportscan, retail sales of Crocs footwear in the Sporting Goods channel have increased 124% YTD when compared to the prior year's similar period. Further, Piper believes the channel remains clean and that spring styles are showing early strength. On Jan 23rd, CROX introduced the new 2008 line of shoes.On Jan 17th, Thomas Weisel is encouraged that spring orders are reportedly ahead of expectations, particularly in Europe, and that their core product continues to book well. They reiterated their Overweight rating.

Kickin' KALU

Kaiser Aluminum Corp. (KALU) manufactures fabricated aluminum products primarily in the United States. They are announcing earnings before the bell on Tuesday. I expect the shares to be volatile and gap.

KALU is expected to bring in $0.93 EPS with $333.99 million in revenue. High estimates are for $1.02 EPS and $348.28 million for revenue. They have beaten the last two times they reported and missed the other two reports. Their recent beats could be a function of strengthening global growth in demand for their products. For the current quarter, growth estimates look healthy at 57.6%. I expect them to beat the top and bottom line and possibly raise. Some clues to guidance could come from a KALU press release on Feb 13th.

On Feb 13th, Kaiser Aluminum Corporation announced that its Board of Directors has approved $14 million in additional investments to enhance and expand extrusion capabilities at its Tulsa, Okla., and Sherman, Texas, facilities, and deploy "future state" upgrades to the casting complex at its Trentwood facility. The additional investments increase the capital expenditures of Kaiser Aluminum's organic growth program to $244 million. Sounds like they are planning for future growth and are making operational adjustments due to increased demand for their products.Karen Finnerman of Fast Money likes KALU going into earnings.

Super STP

Boy, these Chinese solar companies have taken a beating since the start of the year, Suntech Power Holdings (STP) notwithstanding. Since trading at $88 on Jan. 3rd, it has fallen almost half in price sitting at $48.50. STP announces earnings on Wednesday before the bell. They are expected to bring in $0.36 EPS and $420.29 million in revenues for the quarter. High estimates are for $0.44 EPS and $447.36 million in revenues.

They have beaten the last two quarters, missed one and met one. Current quarter growth estimates are a robust 80%. STP does not show big gap action in reaction to earnings but with the recent downtrend could recieve a relief pop on good earnings and guidance. It should move after the call as well and move other solar plays in sympathy.

Gamblin' Garmin

Garmin Ltd. (GRMN) is set to announce earnings before the bell Wednesday. GRMN will be volatile after the results are announced as indicated by previous technicals. GRMN is expected to bring in $1.11 EPS and $1.04 billion in revenues. High estimates are for $1.21 EPS and $1.15 billion in revenues. Growth estimates are for 27.6% for the current quarter and 53.2% for the year. Analyst estimates have been raised 3 times in the past 30 days and have risen the consensus estimates since last earnings from $1.07 to $1.11.

Navteq (NVT) beat its earnings on Feb. 6th with 61 cents vs. 48 cents consensus, showing strength in this market, but one has to remember that NVT is different than GRMN. NVT licenses its digital map database to a host of various platforms and businesses and isn't bogged down with hardware related issues (i.e. expenses) as well as distribution bottlenecks or product cycles. SiRF (SIRF) came out with worse than expected earnings and got slaughtered, and now is facing a slew of shareholder lawsuits. Analysts have come out to defend the shares the past month, even when they downgrade the price, still talk bullishly about future prospects.

The BIG news for GRMN is that they are coming out with a new smart, touchscreen phone with GPS (announced on Jan. 31). They are looking to move in on the hot smart phone market against AAPL. This new phone is called the Nuvifone. I believe this was a great strategic move in order to position the company better for its future hardware sales, lest they become outdated and insignificant as cell phone companies move into their market. Here is a clip of the new Nuvifone.

The Nuvifone is expected to launch in the 3rd quarter of this year just in time for Xmas. The product itself looks great, Thomas Weisel said they viewed the move as correct from a strategic standpoint since cell phone companies are moving into GRMN's sector but they also believe the automotive business could contract. and the interface looks very much like the iPhone. It would also make sense that GRMN's automotive segment could be marginalized as GPS moves more from the automotive platform to the mobile phone platform.

GRMN will be volatile after earnings as shown in previous technicals. I expect a gap up or gap down and a run in duration. GRMN has dropped from its highs of $125 in late October to $66, with a recent low of $55. The trending lower move tells me that expectations have moved considerably lower although momentum has slowed to the downside as a good consolidation phase has played out since mid-January. GRMN has a good float conducive of a volatile move with a 6% short interest of 7.44 million shares and a short ratio of 2.

I think that given the drop from its highs and its new entrance into this fast growing mobile market, that GRMN is a great long term buy now and especially if they drop considerably after earnings. Yes, the phone could marginalize its automotive segment but the strategic shift could more than increase revenues and EPS in the long run making up for it. Now that they have said that the Nuvifone is coming out in the 3rd quarter of this year, they better meet those projections or miss the holiday season and face further downward pressure.

GRMN could also lose a strategic timed entry against others moving into the mobile handset space such as Google (GOOG). The industry landscape could get crowded with AAPL, GOOG, Research In Motion (RIMM) and GRMN, but those should be the top 4 smartphone companies going forward. This new revenue stream looks promising and could be a catalyst for higher guidance for this year and next. Something to look forward to in the C.C. and earnings release.

GRMN's trailing P/E (20) and forward P/E (15) look reasonable with this new growth initiative going forward. I will be strangling this earnings catalyst with a directional bias to the upside with options, long volatility. Here are some analyst thoughts and developments recently regarding GRMN:

On Feb. 15th, Thomas Weisel said they expect in-line Q4 results and that 2008 guidance is unlikely to top consensus due to aggresive pricing declines (They do have a point with the pricing declines, GRMN has cut prices on thheir products and this could lead to some mixed results and declining gross margins). They maintained a Market Weight rating. On Feb. 8th, GRMN was upgraded to Buy from Neutral by DA Davidson.

On Feb. 7th, Wedbush expects shares to rebound from recent weakness, reiterate Buy. Wedbush expects GRMN shares to rebound from recent weakness after solid Navteq results, this should ease some concerns from the SiRF results. They believe both Navteq and SiRF highlight a robust Q4 in the PND market (They obviously believed that SIRF's miss was company specific). On Feb. 6th, GRMN announced a great, strategic revenue bearing partnership with Ford to deliver navigation to Ford's commercial vehicles (2009 F-150, F-Series Super Duty pickups, and commercial E-series vans) announced at the 2008 Chicago Auto Show.

On Feb. 1st, Needham upgraded shares from Hold to Buy with a target of $85 saying they believed the risks are more than priced into the shares at current levels.On January 31st, GRMN announces the launch of the Nuvifone calling it, "an all-in-one, sleek and slim, touchscreen device that combines a premium phone, mobile web-browser, and cutting-edge personal navigator. The Nuvifone is a work of art in features, design and functionality and is destined to transform how individuals connect, communicate and navigate their life."

Four analysts came out with comments about the launch all loving the product and strategic move:

JMP Securities expects the phone to be well received by the carriers and reiterated their Outperform rating. Oppenheimer said they believed the Nuvifone will give traction to GRMN in the handset market by reiterating their Outperform rating. They believe the device breaks new ground by combining navigation and location based services. Soleil lowered their target to reflect the market environment from $130 to $90 but maintained their Buy rating and viewed the Nuvifone introduction as a positive. Before the announcement of the Nuvifone, the Great Cramer had been bearish about GRMN but so far has not said anything about GRMN after the announcement but should say something about them after the numbers. I'd say he's neutral.

On Jan. 24th, Oppenheimer upgraded GRMN to Outperform with a $77 price target based on valuation, believing sentiment has troughed and that downward revisions are already priced into the shares.On Jan. 22nd, Morgan Stanley said that GRMN's market share and pricing has stabilized and that the shares look oversold near-term at the current levels (shares hit the $55

Comments

[bstronger]

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[RD2.0]

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[RD2.0]

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[optiondragon]

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[optiondragon]

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[optiondragon]

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