We expect Deckers Outdoor Corp. (DECK) to beat expectations when it reports third-quarter fiscal 2015 results on Jan 29. In the last quarter, it posted a positive surprise of 15.8%. Let’s see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that Deckers is likely to beat earnings estimates this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. Deckers has the right combination of the two key components.
Zacks ESP: Deckers currently has an Earnings ESP of +1.33%. This is because the Most Accurate estimate stands at $4.58, while the Zacks Consensus Estimate is pegged at $4.52.
Zacks Rank: Deckers carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1, 2 or 3 have a significantly higher chance of beating earnings estimates. Conversely, the Sell-rated stocks (Rank #4 and 5) should never be considered going into an earnings announcement.
Deckers’ Zacks Rank #3 and ESP of +1.33% make us reasonably confident of an earnings beat.
What is Driving the Better-than-Expected Earnings?
We believe that product innovation, cost containment, store augmentation and focus on profitable markets have helped Deckers to stay afloat in a cautious consumer environment. This is evident from the company’s better-than-expected second-quarter fiscal 2015 results, mainly attributable to strong demand for UGG, Teva, Sanuk and HOKA brands. We believe expanding its direct-to-consumer operations, omni-channel strategies, effective inventory management and optimum capital allocation will enable Deckers to sustain its growth momentum.
In the trailing four quarters, Deckers had outperformed the Zacks Consensus Estimate by an average of 22.6%.
Other Stocks that Warrant a Look
Here are some other companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:
Thomson Reuters Corporation (TRI) has an Earnings ESP of +2.08% and a Zacks Rank #3.
Chipotle Mexican Grill, Inc. (CMG) has an Earnings ESP of +3.18% and a Zacks Rank #2 (Buy).
Archer-Daniels-Midland Company (ADM) has an Earnings ESP of +3.30% and a Zacks Rank #3.
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