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Skechers (SKX) Q3 Earnings to Rise on Cost Containment

Zacks Equity Research

Skechers U.S.A., Inc. SKX is slated to release third-quarter 2017 results on Oct 19. In the trailing four quarters, it had underperformed the Zacks Consensus Estimate by an average of 19.2%. In the preceding quarter, it missed the consensus mark by 13.6%. The question lingering in investors’ minds now is whether Skechers will be able to post positive earnings surprise in the third quarter. Let’s see how things are shaping up prior to this announcement.

What to Expect?

After witnessing a decline in the bottom line for the five straight quarters, Skechers is likely to post earnings growth in the third quarter of 2017. We note that the current Zacks Consensus Estimate for the quarter under review is 43 cents, which is a penny above from the year-ago period. Meanwhile, analysts polled by Zacks expect revenues of $1,065 million, reflecting a year-over-year increase of 13%. However, we notice that the rate of growth may decelerate from the preceding quarter that saw 16.9% jump in the top line.

Management had earlier guided third-quarter net sales in the band of $1.050-$1.075 billion compared with $942.4 million reported in the prior-year quarter. Additionally, the company had envisioned earnings per share in the range of 42-47 cents.

Factors at Play

Investors remained apprehensive about Skechers’ bottom-line performance that has been declining since the past few quarters due to rise in selling and general & administrative expenses. However, we believe that greater emphasis on new line of products, cost containment efforts, inventory management and global distribution platform may help reverse trend. The company is also enhancing e-commerce platform. Although, Skechers expects to deliver flat sales in the domestic wholesale business, it envisions double-digit growth at its international business as well as company-owned retail stores.

Skechers U.S.A., Inc. Price, Consensus and EPS Surprise


Skechers U.S.A., Inc. Price, Consensus and EPS Surprise | Skechers U.S.A., Inc. Quote

What Does the Zacks Model Unveil?

Our proven model does not conclusively show that Skechers is likely to beat earnings estimates this quarter. 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.

Skechers carries a Zacks Rank #4 (Sell) and has an Earnings ESP of -2.33%, consequently making the surprise prediction difficult.

Stocks with Favorable Combination

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

Zumiez Inc. ZUMZ has an Earnings ESP of +2.67% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

McDonald's Corporation MCD has an Earnings ESP of +1.36% and a Zacks Rank #2.

Best Buy Co., Inc. BBY has an Earnings ESP of +1.85% and a Zacks Rank #2.

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