Result?
The stock is up 3%.
Compare that to Crocs
- Crocs beat estimates by 3 cents; but investors are used to a larger beat.
- Crocs beat their own revenue estimate but was $2.4 million below analysts view
- Crocs raised its yearly revenue guidance but that new level is still below analysts view
- Crocs raised its yearly earnings guidance but that is only in line with analysts view
- Crocs raised next years earnings over and above analysts view
The stock is down >40%
This my friends, is why the stock market is so confounding to newbies or casual game player. And by game, I mean the stock market. Earnings can never be taken in a vacuum. On the surface the Crocs results were far better than Peabody Energy. But earnings versus expectations is the Wall Street game; not earnings in a vacuum. The other consideration is whom are you investing with? I always try to keep that in mind. In Crocs you have a lot of newbie investors alongside momentum folks - neither of which have a strong stomach for even a 5% fall not to mention 10,20, 30%. They will sell into pain. Or in the case of momentum investors, shoot first, ask questions later...err, never. Hence you have an avalanche of sellers. And they need to be washed out.
Peabody Energy? I don't know anyone who owns it - if I mentioned it to the average Joe he'd look at me strangely. Hence the investor base is a whole different 'culture' - they can look out farther than say "next week". All that matters for Peabody Energy is my continuing thesis of coal as the forgotten commodity; even with shoddy margins in Australia (strong dollar). Coal is one of the few industries we have left (outside of software, technology, Hollywood, missiles, and airplanes?) that stands to benefit for Uncle Ben's destruction of the dollars. One word: exports. You can't outsource a coal mine.
So while investors get stunned into disarray as to why Crocs, which reported a fine quarter, was systematically dismantled, and a company like Peabody Energy, with flailing earnings, can rally - there are reasons for it. It just takes a lot of hard knocks before you learn the reasoning - we all were there once; unfortunately, one usually loses a lot of capital while 'learning' so tuition costs are steep on Wall Street. One should be buying Crocs now into this pain, and Peabody Energy back in early September before the peso, err dollar started another massive leg down. Most investors will give up trying to figure it out in the early stages of their 'career' and just turn to mutual funds (hey I have a future solution for that too!) ;)
- Peabody Energy (BTU), the world's largest coal producer, said on Tuesday third-quarter profit fell, hurt by sharply lower profit margins in Australia, but shares rose 3 percent on strong long-term outlook.
- Net earnings were $32.3 million, or 12 cents a share, compared with $142 million, or 53 cents per share, in the same quarter last year, the St Louis-based company said. The company, which has mines and operating facilities in the United States and Australia, said quarterly revenue rose 18 percent to $1.49 billion.
- Analysts, on average, had forecast earnings of 32 cents a share, on revenue of $1.48 billion.
- "The big difference in the numbers stem from sharply lower margins from its operations ... in Australia," JPMorgan analyst John Bridges wrote in a note to clients. Bridges added that the operating margins fell sharply possibly due to local mine inflation and the strong Australian dollar. The company's quarterly operating costs and expenses in the quarter rose 27 percent to $1.27 billion.
- The company expects full-year 2007 earnings of $1.50 to $1.75 a share.
- Peabody expects U.S. coal exports will expand further in the fourth quarter of 2007 and through 2008, while imports are expected to decline.
Long Crocs, Peabody Energy in fund; long Crocs in personal account
