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Earnings Calls Vs. Headlines: Which Offer Investors Better Insight?

ByHelix Investment Management
Published 05/14/2012, 01:06 AM
Updated 07/09/2023, 06:31 AM
FOSL
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Far too many investors buy and sell their holdings based only on the headlines that they see. While this may, from time to time, offer short-term benefits, in the long-term, it is dangerous and usually costs investors money. Fossil (FOSL) provides a dramatic example of this. The company recently reported its first quarter 2012 results, and in the release, commented that the current environment in Europe does not support its previous growth targets.

So it is assumed that Fossil slashed its earnings forecasts for 2012, correct? Well, if you consider a 10 cent cut slashing, then yes. Fossil trimmed its 2012 forecast from $5.40-$5.50 in EPS to $5.30-$5.40.

Shares promptly fell almost 40% as investors reacted to this development. Fossil is cratering in Europe, it was assumed. And yet, on the conference call, Fossil's management was overall positive. The UK and France are growing, and so are Scandinavian countries. Germany was flat. It was Italy and Spain that drove the weakness the company is seeing.

However, Fossil stated that things are already starting to improve this quarter. Investors that had not bothered to listen to the conference call would have missed that fact. In addition, Fossil is growing steadily in Asia and North America, and is planning on expanding its South America business,

The Skagen acquisition will be accretive to earnings this year, and will provide the company with another growth engine in the years to come. It is essential to listen to conference calls to know what management truly thinks about the state of their company and end-markets.

Trading headlines rarely works. But trading conference calls is usually a great way to generate long-term profits.

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