Crocs (CROX, $11.43, up $1.47) is currently up 15% and hit a high of $12.50 earlier this morning after reporting earnings. The stock got hammered in mid-April falling from $20 to below $10 after cutting first-quarter guidance. Well, today Crocs reported those earnings and investors seem to be cheering the news.

When Crocs warned, analysts had expected the company to report earnings of $0.46 a share and found out they would get earnings between $0.08 and $0.13 a share. The company actually reported a loss of $4.5 million or $0.05 a share on revenue of $198.5 million but would’ve posted a profit of $0.09 a share if not for the write-down for the closure of its Canadian plant.

I guess investors took that as “meeting expectations” and perhaps maybe the short sellers are covering their positions after the company did not cut its full-year earnings outlook. Crocs was a “hot stock” for a while hitting a 52-week high of $75.

Here is one thing to remember when you see a “hot stock” fall out of favor with Wall Street. If a stock takes a sudden 50% drop on bad news realize that it has to go up 100% just to reach the level it was trading at before the drop. Rarely do you see this type of rebound over a few quarters let alone even in a year. Stocks can and do come back from these types of beat-downs but in Crocs’ case it is going to be a hard road ahead.

Sure summer is here and the fact that the company didn’t cut guidance tells us they expect a strong summer. Either way it won’t be as strong as originally planned due to the closure of a plant that was suppose to keep up with supply and demand. The writing is on the wall and while Crocs is having a good day today it may just be a matter of time before the bears take control again.

Rick Rouse
Rick@OptionsMentoring.com

Delta (DAL, $9.97, down $0.51) and Northwest (NWA, $11.27, up $0.05) announced they will merge to create the world’s largest carrier. I mentioned over the weekend that the Airline sector could eventually trade higher but needed to consolidate to offset rising jet fuel cost and other expenses. The deal between Delta and Northwest could get the ball rolling for other companies to merge. Early word is that United (UAUA, $22.91, down $0.71) and Continental Airlines (CAL, $21.87, down $0.02) could be next. All of these stocks were positive at the opening bell but are mixed as trading gets underway.

Crocs (CROX, $11.67, down $6.12) is getting hammered after cutting first quarter guidance. Analysts had expected the company to report earnings of 46 cents a share. Crocs is now saying earnings will come in between $0.08 and $0.13 a share after announcing plans to shut down its Canadian plant. Drum-roll please…Crocs use to be a $75 stock (52-week high).

Intel (INTC, $20.65, down $0.04) reports earnings after the bell today. Expect a 5%-8% move on Wednesday but calling the direction could be tricky. On March 3 the company warned about weakness in its memory chip business. However, shares could get a pop if Intel continues to take market share away from AMD (AMD, $5.63, down $0.23) which is sitting at 52-week lows.

Rick Rouse
TheOptionInvestor@yahoo.com