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Crocs (CROX) Surges 6.8%: Is This an Indication of Further Gains?

Crocs (CROX) was a big mover last session on higher-than-average trading volume. The latest trend in earnings estimate revisions might help the stock continue moving higher in the near term.

This story originally appeared on Zacks

Crocs (CROX) shares ended the last trading session 6.8% higher at $134.91. The jump came on an impressive volume with a higher-than-average number of shares changing hands in the session. This compares to the stock's 17.8% loss over the past four weeks.

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The Crocs stock moved higher after Piper Sandler termed the stock as its top idea for 2022 and raised its price target on the stock. The analyst at Piper Sandler expects Crocs to be one of the most impressive consumer growth stories for several years to come. Moreover, analysts at Loop Capital also raised the price target on Crocs. The favorable ratings were mainly backed by the company’s upbeat financial update on Jan 10. The company does not expect material impacts from Omicron and sees strong full-price selling and healthy traffic. It also expects to benefit from the HEYDUDE acquisition.

CROX raised its 2021 revenue and adjusted operating margin guidance to reflect strength in the Crocs brand despite the ongoing supply-chain challenges. Driven by the anticipated strength for the Crocs brand, the company reiterated its view of generating $5 billion in revenues by 2026, before including HEYDUDE revenues. The company now expects an adjusted operating margin of 30% for 2021, which reflects an improvement from the prior view of 28% and suggests a significant expansion from 18.9% reported in 2020. For the fourth quarter, the adjusted operating margin is estimated to be 28%.

For 2022, the company continues to expect revenue growth of more than 20% for the Crocs brand, excluding HEYDUDE. Additionally, it anticipates revenues of $700-$750 million from HEYDUDE in 2022. The company expects the 2022 gross margin to include an incremental $75 million of air freight compared with the prior year.

This footwear company is expected to post quarterly earnings of $1.38 per share in its upcoming report, which represents a year-over-year change of +30.2%. Revenues are expected to be $554.03 million, up 34.6% 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 been revised 8.9% higher over the last 30 days to the current level. And a positive trend in earnings estimate revision usually translates into price appreciation. 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 1 (Strong Buy). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

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