Vans Stock Drops After San Francisco Brokerage Lowers Rating : Market: Change from a ‘buy’ to ‘hold’ recommendation prompted analysts, considering what they view as the Orange company’s long-term growth potential, to classify the stock as a bargain.

ORANGE —  Vans Inc.’s stock dropped 18% in heavy trading Tuesday after a major San Francisco brokerage lowered its rating of the stock from “buy” to “hold.”

The decline prompted other analysts to recommend the stock of Vans, an Orange company that makes casual shoes, as a bargain at the lower price, given what they view as the company’s long-term growth potential.

In Tuesday’s trading on the NASDAQ market, Vans shares lost $2.25 apiece to close at $10.25 after Montgomery Securities analyst Alice A. Ruth issued her “hold” recommendation.

Ruth’s report cited several factors likely to hurt Vans stock over the short term: High inventory levels at the end of the company’s second quarter, which ended Nov. 30, could prompt the company to cut back on production, thus increasing the manufacturing cost per pair of shoes. An anticipated increase in discounts given to major retail chains could eat into profit. And the general weakness in the Southern California economy has slowed sales.

Ruth was unavailable for comment after the report was released.

Vans is scheduled to release its second-quarter earnings information on Tuesday.

David L. Rose, an analyst at L.H. Friend Weinress & Frankson Inc. in Irvine, agreed with Ruth’s summary of the major factors affecting second-quarter earnings. Her advice not to purchase more of the stock was sound, Rose said, given that the shares had run up to $14.50 apiece at the end of November.

“These are fair assumptions--but at $14 or $13 a share,” he said. “With the stock coming down so much, I’d say the stock is a buy.”

There is no doubt that Vans’ earnings will be hurt by the weak economy, Rose said. In October, he said, L.H. Friend lowered its projection for the company’s quarterly profit, saying it expected earnings to be 15 cents a share, rather than the 22 cents expected earlier. But long-term growth potential remains good, he said.

For the fiscal year that ends in May, Vans will likely post earnings per share of 97 cents to $1, Rose said, and for fiscal 1994, between $1.17 to $1.20 a share.

Steven DeLuca, an analyst at Cruttenden & Co. in Irvine, also said Tuesday that the stock is attractive at its reduced price. Cruttenden continues to recommend that investors buy Vans stock when it is low--such as now, DeLuca said.

Richard Leeuwenburg, president and chief executive officer of Vans, said Tuesday that he has no idea why Montgomery Securities would lower its rating of the stock, noting that the soft economy is old news.

Shoe sales have been flat, Leeuwenburg said, given that the region is in a slump. Southern California and Mexico account for half of Vans’ sales, he said. But the company’s long-term outlook continues to be positive, he said.

“We’re about a week away from announcing second-quarter results, so I have to be very circumspect,” Leeuwenburg said. “What I will say is we’re healthy and well, and other than being disappointed by things we don’t understand, like the stock market, we will go about our business of selling shoes.”