Analysts React to Two Earnings Losers: Fossil Group Inc (FOSL), American International Group Inc (AIG)


Earnings season continues to have an impact on individual stocks, and Fossil Group Inc (NASDAQ:FOSL) and American International Group Inc (NYSE:AIG) are among the losers today after releasing disappointing results. Let’s take a closer look:

Fossil Group Inc

Fossil Group shares dropped about 21% Wednesday to post a new 52-week low of $18.10, as earnings continue to evaporate. The fashion accessory maker missed Wall Street’s fourth-quarter sales and profit expectations and provided a soft outlook for its 2017 fiscal year.

In reaction, Piper Jaffray analyst Erinn Murphy slashed her price target for FOSL from $32 to $18, while reiterating a Neutral rating. The new price target represents a slight downside potential from current levels.

Murphy commented, “If Fossil had a quarter where management could have spun a narrative that sounded better, this would have been it–they were transitioning from a GAAP to a non-GAAP earnings basis, the $200M of EBIT “recapture” from New World Fossil gave them cover to speak to tangible streamlining opportunities and Q4 watch sales were actually decent in Q4– inflecting to flat, the best “rate” since Q2-15. While mgmt. spoke to progress made thus far in the restructuring: 1) 40 store closures; 2) headcount reduction; & 3) 16% SKU rationalization of traditional watches, the benefits are being eroded in part by wearable price re-investment. Mgmt. noted that 40% of their initiatives against achieving this longerterm $200M goal had been made. Nonetheless, the guidance is very back-end weighted (58% of sales & >100% earnings in 2H) and the stock is once again in a “show me” stance.”

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Erinn Murphy has a yearly average return of -7.8% and a 36.5% success rate. Murphy has a 10.1% average return when recommending FOSL, and is ranked #4315 out of 4453 analysts.

Out of the 7 analysts polled in the past 3 months, one rates Fossil stock a Buy, four rate the stock a Hold and two recommend to Sell. With a return potential of 21%, the stock’s consensus target price stands at $23.

American International Group Inc

AIG shares tumble 9% to $61.09, as of 11:40 am EST, after the insurance giant reported a bigger quarterly loss, largely due to a charge related to higher reserves to meet claims.

In the wake of earnings, FBR’s top analyst Randy Binner maintains a Market Perform rating on AIG, as he remains cautious around margins, reserves, and credit exposure at AIG.

Binner stated, “AIG reported 4Q16 operating EPS of ($2.72) vs. the FBR ($1.22) and Street ($0.61) estimates. The reserve charge for FY16 of $5.6B gross was much higher than our $3.8B forecast, which was high on the Street. We had been surprised that there was not more upfront reaction to the prospect of a large charge when the reinsurance deal with National Indemnity Company (NICO) was announced on January 20, 2017. The market will likely need to recalibrate around this and the impact to BV. Adjusted BV per common share, which has been the main BV metric that we track, moved from $61.41 at 3Q16 to $58.57 in 4Q16. But, with the NICO cover in place, attention will turn to the go-forward operating prospects. Here we will be particularly focused on whether commercial lines margin goals can hold given soft P/C market conditions. We have viewed this goal as questionable and will also look for broader guideposts on how AIG’s business will perform better than it has in the past.”

According to TipRanks, 5-star analyst Randy Binner has a yearly average return of 17.6% and a 82% success rate. Binner has a 7.0% average return when recommending AIG, and is ranked #65 out of 4453 analysts.

Out of the 19 analysts polled in the past 12 months, 14 rate American International Group stock a Buy, while 5 rate the stock a Hold. With a return potential of 13%, the stock’s consensus target price stands at $68.25.