Fossil Shares Hit the Rocks, But is it Time To Get In?

It looks like the watch business may be seeing its time end - or is the timing just off? Fossil, Inc.

reported

that beat Wall Street estimates. The company lowered fourth quarter earnings below Wall Street estimates, sending shares down as much as 8% this morning, before recovering somewhat through the day. As of the time of this article, shares were off around 4%. Fossil, which makes everything from watches to clothes to accessories, reported third quarter earnings of $1.09 per share. Revenues came in at $642.90 million. Wall Street analysts were looking for $1.03 per share in earnings and $640.6 million in revenues. "We are pleased to report record Third Quarter net sales and earnings continuing our strong momentum from the first half of the year," stated Mike Kovar, Executive Vice President and Chief Financial Officer, Fossil, Inc., in a company release. "Against a backdrop of strong sales growth last year, we generated broad-based, double-digit sales growth across our major product categories, brands and geographies. This quarter also marked our eighth consecutive quarter of global double-digit same store sales increases demonstrating the ongoing strength and resilience of our Fossil brand worldwide. Most importantly, we were able to continue to invest in our infrastructure to support future growth and still deliver an 18.5% operating margin." So why is a company that grew earnings 9% year over year and revenues nearly 25% losing nearly 4% today? Guidance. The company slashed its own guidance for the fourth quarter. It said it now expects earnings of $1.75-$1.78 per share, down from a previous view of $1.78-$1.82 per share. Wall Street analysts are looking for earnings of $1.78 per share. Despite the guidance drop,

on the name to $108, and kept its Overweight rating. Fossil, based in Richardson, Texas, said that it lowered its fourth quarter guidance based on a stronger dollar. It could be the company is under-promising here, as many expect the U.S. dollar to continue to weaken. The Federal Reserve is considering doing a

which would be dollar negative. Federal Reserve Chairman Ben Bernanke has talked about purchasing mortgage backed securities, and there are others on the FOMC who want more stimulus, most notably Charles Evans. For Fossil to say it expects a stronger dollar could be the company trying to deliver upside surprise. Shares are not expensive trading at 17 times expected 2012 earnings, and this tiny dip may be the entry point traders look to initiate a position. Shares have come well off the lows of the session as the earnings report was digested. Now may be the wrong "time" for investors to "dial" back a position in Fossil. It looks as if the company's precision is next to none.

Traders who believe that Fossil is forecasting a strong U.S. dollar to deliver upside surprise might want to consider the following trades:

Traders who believe that Fossil is right and a stronger U.S. dollar does happen may consider alternate positions: