Is Further Upside Left in the Stock?

This story originally appeared on Zacks

Crocs (CROX) shares rallied 8.5% in the last trading session to close at $149.38. This move can be attributable to notable volume with a higher number of shares being traded than in a typical session. This compares to the stock’s 6% loss over the past four weeks.

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The Crocs stock moved higher on strong revenue projections, increased shareholder rewards and progress on sustainability efforts, revealed on its Investor Day. Outlining its long-term strategy and key initiatives, the company projected revenues to be more than $5 billion by 2026, which represents a CAGR of more than 17% in the next five years. The growth is likely to be driven by strong digital sales, improved market share for sandals, growth in Asia and innovative product and marketing. Of these, it targets about 50% of the aforementioned total revenue growth to come from its digital business. Backed by the strong revenue growth, it expects adjusted operating margin to be more than 26% and annual free cash flow in excess of $1 billion by the end of 2026. It also reiterated its earlier mentioned view for 2021.
The company reaffirmed its commitment to reward shareholders by completing the planned $500 million worth share repurchases for 2021, by the end of third-quarter 2021. Further enhancing shareholder returns, the company announced an accelerated share repurchase program worth $500 million, which is expected to be completed by the end of 2021. This will bring the company’s total share repurchases in 2021 to $1 billion.
The company took a leap in its sustainability initiatives with plans to introduce a new shoe made using bio-based material called “Croslite”. It expects the shoe to be launched by the end of 2021. This will place the company on fast-track to achieve the planned 50% reduction in its carbon footprint per pair of Crocs by the end of 2030. As part of its sustainability efforts, the company expects a net zero-carbon brand by 2030.
Price and Consensus

Price Consensus Chart for CROX

This footwear company is expected to post quarterly earnings of $1.80 per share in its upcoming report, which represents a year-over-year change of +91.5%. Revenues are expected to be $612.07 million, up 69.2% from the year-ago quarter.

While earnings and revenue growth expectations are important in evaluating the potential strength in a stock, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

For Crocs, the consensus EPS estimate for the quarter has remained unchanged over the last 30 days. And a stock’s price usually doesn’t keep moving higher in the absence of any trend in earnings estimate revisions. So, make sure to keep an eye on CROX going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank 2 (Buy). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here >>>>

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