Fossil Group (FOSL) Rides Michael Kors (KORS) Wave

NEW YORK (TheStreet) -- While even Wal-Mart (WMTstruggled with wintery weather and hibernating customers, Michael Kors (KORSbreezed past expectations in its December-ended quarter, sending shares soaring on Tuesday. Along for the ride, Fossil Group (FOSL) shares spiked in morning trading as investors saw untapped value in the consumer fashion accessories market.

Fossil Group is due to report fourth-quarter results next Tuesday, Feb. 11. Analysts surveyed by Thomson Reuters anticipate quarterly net income of $2.44 a share on $1.02 billion in revenue. For the full year, consensus is for per-share earnings of $6.33 on $3.2 billion in revenue.

By late morning, shares had added 5.3% to $113.75.

TheStreet Ratings team rates FOSSIL GROUP INC as a Buy with a ratings score of B. The team has this to say about their recommendation:

"We rate FOSSIL GROUP INC (FOSL) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, notable return on equity, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • FOSL's revenue growth has slightly outpaced the industry average of 16.7%. Since the same quarter one year prior, revenues rose by 18.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • FOSSIL GROUP INC has improved earnings per share by 25.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, FOSSIL GROUP INC increased its bottom line by earning $5.62 versus $4.62 in the prior year. This year, the market expects an improvement in earnings ($6.34 versus $5.62).
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Textiles, Apparel & Luxury Goods industry and the overall market, FOSSIL GROUP INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for FOSSIL GROUP INC is rather high; currently it is at 59.96%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 11.07% is above that of the industry average.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.

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