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Deckers (DECK) Q3 Earnings Likely to Increase Y/Y: Here's Why

Zacks Equity Research

Deckers Outdoor Corporation DECK is slated to report third-quarter fiscal 2019 results on Jan 31, after the market closes. In the last four quarters, this Goleta, CA-based footwear and apparel retailer outperformed the Zacks Consensus Estimate by an average of 69.1%. Investors are counting on another beat by Deckers in the to-be-reported quarter.

The Zacks Consensus Estimate for third-quarter earnings is pegged at $5.31 compared with $4.97 in the year-ago quarter. We note that the Zacks Consensus Estimate has improved by 7 cents in the past 30 days. The consensus estimate for revenues currently is pegged at $826.9 million, showing an improvement of approximately 2% from the year-ago quarter. If all goes well, this will be the eighth straight quarter of positive earnings and sales surprises.

Key Factors Influencing Q3

Deckers is targeting profitable markets. The company is focused on product innovation and store augmentation plan. Further, the company’s focus on expanding brand assortments, bringing more innovative line of products, targeting consumers through marketing and optimizing omni-channel distribution bodes well. These are likely to have a favorable impact on the to-be-reported quarter.

In keeping with the changing trends, Deckers has made substantial investments to strengthen online presence and open smaller concept omni-channel outlets. Additionally, the company has undertaken strategic initiatives to drive growth.

Management had earlier guided third-quarter net sales in the range of $805-$825 million compared with $810.5 million a year ago. The company had projected earnings in the band of $5.10-$5.25.

However, industry experts are concerned about Deckers' over-reliance on the UGG brand. In the event of stagnation or decline in UGG sales growth, the company's overall results will be affected. This is because the percentage of contribution from the company’s other brands are too minimal to offset any slowdown in UGG sales.

The Zacks Consensus Estimate of revenues for Sanuk brand is $13.3 million, reflecting a year-over-year decrease of about 4.7%, while the same for Teva brand is $18.9 million, indicating a decline of approximately 3.1% year over year. Sales from UGG brand are expected at $726 million, down 1.2% from the prior-year period.

Deckers Outdoor Corporation Price, Consensus and EPS Surprise

 

Deckers Outdoor Corporation Price, Consensus and EPS Surprise | Deckers Outdoor Corporation Quote

Model Predicts Higher Probability of Earnings Beat

Our proven model shows that Deckers is likely to beat estimates this quarter. This is because a stock needs to have both — a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Deckers has an Earnings ESP of +3.63% and a Zacks Rank #1. This makes us reasonably confident that it is likely to outperform estimates.

3 More Stocks With Favorable Combination

Here are three other companies you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat:

Foot Locker FL has an Earnings ESP of +1.47% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dillard's, Inc. DDS has an Earnings ESP of +2.56% and a Zacks Rank #2.

Five Below FIVE has an Earnings ESP of +0.45% and a Zacks Rank #2.

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