CROX – Crocs Stock is Totally Out of Fashion

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Welcome to the Stock of the Day.

It has been a long time since Crocs  (CROX) was fashionable—both with its clunky shoes on Main Street and with its clunky shares on Wall Street.

But now that the company has attracted a sizeable investment from Blackstone (BX) and is on the cusp of a major executive shakeup, could Crocs stock fortunes change in 2014? Find out now.

Company Overview

Crocs  may just produce the most unique shoes on the market. The company has patented its own material, Croslite, which is featured in all Crocs brand shoes. What makes Croslite different is that it is comfortable, lightweight, odor-resistant and with a superior grip.

Crocs used to be notorious for their clunky style, but the footwear giant has been revamping its brand. The company has also embraced its roots as prime nurse-wear and now provides products for hospital, restaurant, hotel and other hospitality markets.

Word on the Street

CEO John McCarvel just announced his retirement and Blackstone announced that it is investing $200 million in the footwear company. The company plans to put that $200 million towards stock buyback programs—increasing its current share repurchase program to $350 million. Investors also cheered the ouster of McCarvel, who had been seen as a roadblock to success—particularly in closing underperforming stores and limiting addition store openings.

Is this enough to revise my sell-recommendation for Crocks stock?

Earnings Outlook

In this case, I’m going to let sales and earnings speak for themselves. This time last year, Crocs  posted earnings of 4 cents per share for the fourth quarter. As meager as that is, that’s still light-years ahead of where analysts expect the company to be for Q4 2013.

Right now, Crocs  is expected to post a loss of 21 cents per share and $222.25 million in sales—below the $224.99 million brought in the year ago quarter. Over the past 60 days the analyst community has slashed its consensus EPS estimate for the fourth quarter (from -3 cents to -20 cents per share), by 8% for the first quarter and by 16% for next year. So despite what Blackstone may be up to, it’s going to take Crocs a long time to turn itself around.

Current Ratings:

Before you buy any stock, you should always run it through my free Portfolio Grader ratings system. 2013 has not been a good year for Crocs stock—it’s been at a sell for the past 12 months running. And it doesn’t look like 2014 will be much better. Buying pressure could hardly be lower, so CROX receives an F for its Quantitative Grade.

On the fundamentals side, there is a lot of room for improvement: The company earns a D for its Fundamental Grade. That’s because of the eight metrics I graded it on, Crocs outright fails on six of them (sales growth, operating margin growth, earnings growth, earnings momentum, earnings surprises and analyst earnings revisions).Only return on equity (B) and cash flow (A) receive solid marks.

Bottom Line: As of this posting I consider CROX an F-rated Sell.

Sound Off: What do you think about CROX? Are you a buyer at current prices? Let me know what you think by posting on our wall on Facebook. For more stock grades and commentary, please visit NavellierGrowth.com!