Earnings preview: Movado high on optimism in Q3

During the second quarter, Movado (MOV) had reported mixed results, with net sales improving 12% to beat estimates, even as earnings came in line with the consensus. Though investors sent the stock down the same day, the watchmaker found its results bullish enough to raise its full-year sales outlook to $660-$675 million,  compared with the prior projection of $615-625 million.

The Q3 results will give a clear picture of whose analysis of the second quarter was more precise.

Movado reports third-quarter results before the opening bell on Tuesday. Analysts expect 9% growth in earnings to $1.13 per share.

Optimism is high during the third quarter, partly fuelled by the raised full-year guidance. During the second quarter, the New Jersey-based watch manufacturer also raised full-year EPS outlook from $2.35-$2.40 to  $2.45-$2.55.

Apart from the outlook, the company’s recent acquisitions, store expansion strategies and marketing efforts also lend a positive aura to the stock. Four months back, Movado purchased watch startup MVMT for $100 million. MVMT makes watches primarily for millennial customers and is known for heavy Facebook marketing.

The acquisition opens up a new market for Movado, besides giving a team that is well-versed with newer advertising tactics.

Movado Group Q2 revenue tops estimates; earnings in line with expectations

Similarly, in July 2017, Movado acquired UK-based women’s watch brand Olivia Burton for $79 million. Through these acquisitions, Movado is gaining inroads into new geographic markets amidst rising threat from smart bands and other similar devices.

The company has also been ramping up its digital platform, though the investments are likely to weigh on its bottom line in the coming quarters.

MOV stock has gained 10% so far this year. The stock, which was trading in red on Monday, has an average 12-month price target of $50, which is at a 43% upside from the current trading price.

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