Investors looking for an extra spring in their step should turn their attention to the "ugly" shoe market. On Thursday, shares of Crocs surged more than 12% to reach $121.63, following the footwear maker's impressive fourth-quarter results that surpassed analysts' expectations. Crocs also reaffirmed its full-year forecast, projecting adjusted earnings per share of $12.05 to $12.50, which exceeded the consensus estimate of $11.90 per share.
Solid Finish to a Strong Year Baird analyst Jonathan Komp described the report as a "very solid finish to a strong year" and subsequently raised his price target for Crocs from $155 to $160, underscoring his unwavering confidence in the stock. Komp rates Crocs stock at Outperform. Similarly, Raymond James analyst Rick Patel raised his price target to $145 from $120 after the impressive results. He believes that Crocs possesses compelling drivers for durable growth, such as its expanding international and direct-to-consumer businesses as well as ongoing innovation. Patel holds a Strong Buy rating on the shares.
Bullish Sentiment and Consensus Earnings Estimates Approximately two-thirds of the analysts covering Crocs maintain a bullish stance on the shares. Furthermore, consensus earnings estimates for the full year increased by nearly 5% after the report, according to data from FactSet.
Riding the Wave of Comfortable-Fashion Trend Crocs experienced a remarkable surge in sales during the pandemic as consumers sought out comfortable-shoe options. This trend has continued, as Crocs remains a popular choice in the casual-fashion market. Since our recommendation in September 2002, the stock has soared more than 180%, outpacing the return of the S&P 500. Year-to-date, the stock has surged 30%.
Not the Only Player in the Market Crocs is not the only ugly-chic shoe maker outperforming the broader market rally. Investors also rewarded Deckers Outdoor earlier this month, with the company experiencing a double-digit gain after beating its fiscal third-quarter expectations and raising its outlook.
With the ongoing success of Crocs and other similar brands, it is evident that the demand for comfortable yet fashionable shoes remains strong. As a result, investors should consider these "ugly" shoe stocks as a potential opportunity for growth and profitability.
Crocs and Deckers Outperform Other Footwear Brands
The latest earnings report from the maker of Uggs and Hoka running shoes, Deckers, has exceeded expectations, thanks to strong direct-to-consumer sales, an expanded product lineup, and high demand. Despite the bar being set high, Deckers has managed to beat projections. Year to date, the company's stock has soared more than 30%, and since it was recommended in the autumn of 2022, it has seen an impressive 160% increase.
However, not all footwear brands have experienced the same success. Skechers encountered a downturn following its earnings report in early February, while Nike ended the year on a disappointing note with a forecast that caught analysts and investors off guard. As a result, Nike's shares experienced their largest drop in nearly 15 months.
This signals the importance of being discerning within the footwear market. Similar to Deckers, Crocs remains an attractive option even after its positive earnings release. At present, Crocs' shares trade for less than 10 times forward earnings, significantly below its five-year average of 14.3 times.
Furthermore, Crocs' outlook for 2024 suggests potential for further positive surprises. The company is actively paying down its debt and continues to repurchase its own shares. These initiatives are supported by Crocs' growing free-cash-flow profile, as well as consistently improving margins.
While Crocs may not align with everyone's fashion preferences, the stock is displaying strong performance.
