U.S. Markets open in 2 hrs 2 mins

Things You Need to Know Before Skechers' (SKX) Q2 Earnings

Zacks Equity Research
1 / 2

Things You Need to Know Before Skechers' (SKX) Q2 Earnings

Skechers' (SKX) second quarter projection includes an expected shift in shipments from the second quarter to the later part of the year for quite a few important international distributors and domestic accounts.

Skechers U.S.A., Inc. SKX is scheduled to release second-quarter 2018 results on Jul 19 after the market closes. In the trailing four quarters, it has outperformed the Zacks Consensus Estimate by an average of 21.3%. In the preceding quarter, it reported in-line earnings.

The question lingering in investors’ minds now is whether Skechers will be able to post positive earnings surprise in the quarter to be reported or not. Let’s see how things are shaping up prior to this announcement.

What to Expect?

The Zacks Consensus Estimate for the quarter under review is pegged at 40 cents compared with 38 cents in the prior-year period. The consensus estimates have been stable in the last 60 days but witnessed a sharp downward revision in the past 90 days. Meanwhile, analysts polled by Zacks expect revenues of $1.13 billion, reflecting more than 10% growth on a year-over-year basis.

Management had earlier projected second-quarter net sales in the band of $1,120-$1,145 million compared with $1,025.9 million reported in the prior-year quarter. Additionally, the company anticipates earnings per share in the range of 38-43 cents.

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

Factors at Play

Skechers’ second quarter sales and earnings view came below analysts’ expectations. We note projections includes an expected shift in shipments from the second quarter to the later part of the year for quite a few important international distributors and domestic accounts.

Investors also remain concerned about higher selling and general & administrative expenses that may hurt the company's margin. We note that selling expenses have increased 37%, 31.6%, 32.1% and 7.4% in the first, second, third and fourth quarters of 2017, respectively. Following the same chronological order, general & administrative expenses have increased 16.6%, 25.5%, 21% and 24.7%, respectively. In the first quarter of 2018 selling expenses increased 14.4%, while general & administrative expenses rose 25.8%.

Nevertheless, Skechers’ greater emphasis on new line of products, store remodeling projects, cost containment efforts, inventory management and global distribution platform are the primary catalysts. Moreover, its domestic e-commerce business contributed to sales growth in the quarter, registering an increase of 12.7% during the first quarter of 2018. It currently operates e-commerce sites in Chile, Germany, the U.K., Spain and Canada.

Skechers’ international business also remains a considerable sales growth driver for the company, with Europe and China being the significant markets outside the United States. Furthermore, it is poised to enhance global reach in the footwear market through its distribution networks, subsidiaries and joint ventures (JVs).

What the Zacks Model Unveils?

Our proven model does not conclusively show that Skechers 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.

Skechers has a Zacks Rank #4 (Sell) and an Earnings ESP of 0.00%. Consequently, making 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:

Urban Outfitters URBN has an Earnings ESP of +1.46% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Nordstrom JWN has an Earnings ESP of +0.64% and a Zacks Rank #3.

American Eagle Outfitters AEO has an Earnings ESP of +12.08% and a Zacks Rank #3.

Wall Street’s Next Amazon

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.

Click for details >>