Don't Be Fooled by Movado's Post-Earnings Decline

Movado Group (NYSE: MOV) released fiscal third-quarter 2019 results last week, which included broad-based geographic strength and the promise of incremental growth from the watchmaker's recent acquisition of MVMT. While shares initially popped nearly 13% in response to the news, Movado stock has all but given up those gains in the days since to trade near a nine-month low.

Now that the dust has settled, let's take a closer look at what Movado had to say and what we can expect as it closes its fiscal year.

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Movado Group results: The raw numbers

Metric

Fiscal Q3 2019*

Fiscal Q3 2018

Year-Over-Year Growth

Net sales

$208.9 million

$190.7 million

9.6%

GAAP net income (loss)

$26.9 million

$17.4 million

54.6%

GAAP earnings (loss) per share

$1.14

$0.75

52%

What happened with Movado this quarter?

  • Net sales grew 10% on a constant-currency basis.
  • On an adjusted (non-GAAP) basis, which excludes unusual tax adjustments and acquisition expenses, net income was $27.9 million, or $1.18 per diluted share, up from $24.3 million, or $1.04 per share in the same year-ago period.
  • By contrast, most analysts watching the stock were modeling lower adjusted earnings of $1.12 per share on revenue of $205.4 million.
  • On October 1, 2018, Movado completed its previously announced $200 million acquisition of MVMT, including a $100 million initial payment (or $85 million net of tax benefits) and up to $100 million in future pre-tax contingent payments.
  • Movado ended the quarter with $142.7 million in cash and cash equivalents.
  • Movado repurchased and retired 46,800 shares this quarter, leaving $44.1 million remaining under its current repurchase authorization.

What management had to say

Movado chairman and CEO Efraim Grinberg added:

Looking forward

Movado reiterated its full fiscal-year 2019 guidance, which -- assuming current exchange rates remain consistent -- calls for net sales of $660 million to $675 million and net income per share of $2.45 to $2.55.

All told, there was little not to like about this impressive quarter. In fact, similar to its unusual post-earnings decline three months ago -- and with shares up nearly 33% in the year leading up to these results -- it seems Movado's elevated share price was the only thing with which the market might have taken offense. As such, I think patient long-term investors could do well to take advantage of this pullback and consider opening or adding to a position today.

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Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.