Please ensure Javascript is enabled for purposes of website accessibility

Fossil Group Inc. and Garmin Ltd. Jump as Stocks Rally

By Demitri Kalogeropoulos - Feb 17, 2016 at 6:15PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Down by 10% last week, indexes have cut their year-to-date losses to less than 6% during the past three strong trading sessions.

Stocks notched solid gains for the third-straight session today. The Dow Jones Industrial Average (^DJI 0.18%) gained 257 points, or 1.6%, and the S&P 500 (^GSPC -0.20%) added 31 points, or 1.7%. The beaten-down energy sector led the way higher today, followed closely by technology stocks.

Indexes have cut their 2016 losses roughly in half over just the past few days, and are now down less than 6%, year to date.

^DJI Chart

^DJI data by YCharts.

A few individual stocks performed much better than the market averages, though, including Fossil Group (FOSL -3.18%) and Garmin (GRMN -0.46%), which both posted fourth-quarter reports before the opening bell.

Fossil sees a return to growth
Watchmaker Fossil Group saw its stock spike 29% higher after posting surprisingly strong fourth-quarter earnings numbers. Sales fell by 2% overall, which was good enough to hit the upper-end of management's November guidance, which projected between 11% and 2% lower revenue during the holiday quarter.

Source: Fossil.

In encouraging news for the business, the decline in watch sales showed solid improvement as the Q4 pace was a 2% loss compared to an 11% dive in the prior quarter. At that time, CEO Kosta Kartsotis said management was "not satisfied" with the double-digit sales slump, and the team managed to post a solid rebound in the following quarter.

The profit picture worsened, as Fossil's gross margin slumped to 53% of sales from 57% a year ago. As a result, net income was cut in half, to $70 million. Executives blamed foreign currency swings and price cuts for the decline.

Yet the company's 2016 outlook leaves the door open for a return to sales growth. "We remain very optimistic about our future and confident in our long-term strategies," Kartsosis said.

Fossil's executives believe the company could post a 1% revenue improvement in 2016 at the high-end of guidance, compared to last year's 9% drop. For a stock that was down 70% during the past year, that glimmer of optimism was enough to send shares sharply higher today.

Garmin overcomes the car GPS slump
Garmin's stock spiked 17% higher after its fourth-quarter results trounced consensus estimates. The GPS device maker's sales slipped by just 3% over the holiday quarter, compared to the 7% decline that analysts were bracing for. Meanwhile, profits ticked lower to $0.74 per share, which was far ahead of the $0.48 per share Wall Street forecast.

Source: Garmin.

Garmin managed sales growth in four of its five main product categories, fitness, outdoor, aviation, and marine, which almost completely offset the 21% slump in its automobile division. The company also maintained good pricing discipline as its gross profit margin fell by less than one percentage point, to 53% of sales. "Despite the challenging global economic environment and the intensified competitive landscape of 2015," CEO Cliff Pemble said, "we finished strong with revenue and margins exceeding our expectations."

Management's 2016 forecast wasn't exactly a rousing one. It sees a flat sales year ahead, for a minor improvement over 2015's 2% decline. Operating profitability is expected to slip to 18%, or $510 million, from 19.5%, or $550 million, in the year that just concluded. But that forecast was better than analysts were modeling, so it makes sense that the stock would recover some of the 35% decline it has endured during the last 52 weeks.

Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool recommends Fossil. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$33,974.19 (0.18%) $61.64
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$4,288.76 (-0.20%) $-8.38
Fossil Group, Inc. Stock Quote
Fossil Group, Inc.
FOSL
$5.48 (-3.18%) $0.18
Garmin Ltd. Stock Quote
Garmin Ltd.
GRMN
$99.07 (-0.46%) $0.46

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
403%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/16/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.