Oracle Corporation (ORCL), KB Home (KBH): Post-Earning Performances: Value or Value Traps?

Watch Performance May Be Seasonal, & Not a Long-Term Problem

The watch designer Movado Group, Inc (NYSE:MOV) saw a 10.48% loss on Thursday after the company reported better than expected earnings, but guided lower than the consensus. The company saw top line growth of 7.6% year-over-year, which was good, but now that we are looking ahead to the future, February data from Swiss watches obviously spooked investors.

According to the Federation of Swiss Watch Industry, there was an 18% drop in February sales for the $200 watch category. This category directly affects makers such as Fossil and Movado. However, those in the $300 category saw strength, which indicates that consumers are still buying nice watches and that the weak performance of Movado might be seasonal. Just last year Fossil lost about half its value with poor performance (around this time), but has since recovered nicely. As a result, the weakness from watch companies might be more timing related, and therefore Movado might be presenting value on this weakness.

Conclusion

When a stock trades drastically lower or pops significantly higher after earnings you must ask yourself, “was the news worth the movement?” Far too often we make assumptions based on performance, but the best investors are able to use stock movement as an opportunity to capitalize on value. Therefore, as I’ve discussed often, when it comes to earnings, read the report first and then assess the performance second, and you will find inconsistencies you can profit from.

The article Post-Earning Performances: Value or Value Traps? originally appeared on Fool.com and is written by Brian Nichols.

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