Fossil Inc (FOSL), PVH Corp (PVH): Who Do You Believe? The Company Or The Analysts?

The third issue is, Fossil Inc (NASDAQ:FOSL) is telling investors to expect much less in the future. The question for investors is, do you believe what analysts expect, or what the company is saying?

This Is Either Sandbagging Or An Earnings Miss Is Coming
Some companies have become famous for sandbagging their estimates. This is the practice of saying sales and earnings will be worse, and then reporting figures that beat these lowered estimates.

The company says that full year sales should increase 10% to 11%, the average analyst has the sales increase for 2013 pegged at 10.6%. However, when it comes to EPS, the company suggested diluted EPS of between $5.85 and $6.15. The average analyst has EPS for 2013 at $6.08.

This $6.08 projection is, almost 4% above the company’s lowest number, and just 1.14% below their best outlook. Given that the company expects their operating margin to compress from 17.1% in 2012, to between 16.5% and 17% for 2013, it seems possible analysts are being too optimistic. Longer-term analysts are calling for better than 16% EPS growth, but in the next year the company is forecasting growth of between 8.5% and 14.1%.

Better Value Elsewhere
The real problem for investors is, Fossil shares trade for 16.3 times projected earnings, and if the company doesn’t deliver on this longer-term 16%+ EPS growth, shares could be marked down accordingly.

While Ralph Lauren and PVH Corp (NYSE:PVH) both sell for higher multiples at 21.3 and 18.4 respectively, each company has a broad portfolio of products that should lead to consistent results. In addition, Ralph Lauren at least pays a yield of 1%, something that Fossil Inc (NASDAQ:FOSL) investors don’t have to fall back on. The gem of the group is Michael Kors. The company is projected to grow EPS by 32% and sells for about 31 times earnings for 2013. With margins that are much higher than the competition, and market crushing sales growth, Michael Kors could be the way to go.

Fossil just turned in questionable sales growth, margins are expected to move lower, and an earnings miss could occur. This doesn’t sound like a company to believe in at the current time.

The article Who Do You Believe? The Company Or The Analysts? originally appeared on Fool.com and is written by Chad Henage.

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