This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Smith & Wesson and Coach: High Hopes and Low Expectatations

Stocks in this article: SWHC COH

NEW YORK (TheStreet) -- By the time any investor has notched up a few quarterly earnings rounds they have worked out that "good" results do not necessarily mean a positive share price reaction. The same with "bad" results and a negative reaction, too. What is already expected matters.

Take the results released by the leading firearms company Smith & Wesson (SWHC). The company's full year 2013-14 results were described as achieving the "highest sales, gross margin and profit in the company's history" but the shares closed down nearly 9% Friday at $15.52. Despite being up 15% for the year to date, hopes for 2014-15 were just too high and company guidance did not meet these lofty hopes.

Investors and individuals have a wide range of views on guns and the companies that produce and market them but any financial number cruncher was going to be impressed by Smith & Wesson's comments in its conference call about firm pricing, product innovation, continued willingness to undertake share buybacks and a view that the underlying addressable market "should expand about 8% to 10% per annum."

These are company characteristics that will positively support the share price over the next year...especially if expectations are now more under control.

This cuts the other way, too. Investors can get too pessimistic about a company's prospects by making the mistake of extrapolating a current trend into the permanent future.

Another company that disclosed a corporate update was the handbag and other fashion items retailer Coach (COH), which said that North America revenue would decline in the low double digits during its fiscal year 2014.

Coach's North America sales had already been very poor but this disclosure appears to have investors moving closer to completely writing off the company. As I noted back in April commentators miss the growing influence of sales in Europe and Asia and a management team that are close to a major fashion re-launch which has the potential to revitalize the company.

Finally, Coach's management continues to buy back shares and the share yields now over 3%. Just as Smith & Wesson has struggled to meet lofty expectations, Coach now has rock-bottom ones -- even lower than when I first wrote about this in April. The chances of a corporate result that positively surprises investors is rising, and this makes the company a good risk-reward play, in my view.

The lesson for investors is to understand what is already anticipated and when hopes are overly high or overly low to look for opportunities to sell or buy as relevant. Precise timing is never easy but -- with a little patience -- the opportunities and payoffs can be good.

At the time of publication the author had a position in Coach.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

>>Smith & Wesson Sales Show Gun Buying in Decline: StockTwits.com

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,656.77 +299.90 1.73%
S&P 500 2,045.29 +32.40 1.61%
NASDAQ 4,722.2680 +77.9560 1.68%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs