Factors Likely to Decide Deckers (DECK) Fate in Q3 Earnings

Deckers Outdoor Corporation DECK, the footwear and apparel retailer, is slated to report third-quarter fiscal 2018 results on Feb 1. In the second quarter, the company delivered positive earnings surprise of 49.5%. Let’s see how things are shaping up for this announcement.

Which Way are Estimates Treading?

Investors are keen to find out whether Deckers will be able to sustain its positive earnings surprise streak in the quarter to be reported. In the trailing four quarters, it had outperformed the Zacks Consensus Estimate by an average of 88.3%. The current Zacks Consensus Estimate for the quarter under review has decreased by a couple of cents in the last 30 days and is pegged at $3.84, reflecting a year-over-year decline of 6.6%. Analysts polled by Zacks expect revenues of $750.2 million, down more than 1% year over year.

Factors at Play

Deckers is targeting profitable markets and remains focused on product innovations and store augmentation along with transitioning to a direct subsidiary model from a distributor model outside the United States. The company’s focus on expanding brand assortments, bringing more innovative line of products, targeting consumers through marketing and optimizing omni-channel distribution also bode well.

In keeping with the changing trends, Deckers has made substantial investments to strengthen online presence and improve shopping experience for customers. Further, it is focused on opening smaller concept omni-channel outlets and expanding programs such as Retail Inventory Online, Infinite UGG; Buy Online, Return In Store; and Click and Collect to enhance shopping experience.

Moreover, in an effort to drive long-term growth, the company has taken strategic initiatives. Its store fleet optimization plan focuses on striking the right balance between digital and physical stores.

However, management had earlier informed that it expects third-quarter net sales to decline due to the timing of orders from the third quarter into the second. Net sales for the quarter under review are estimated to be in the range of $735-$745 million down from $760.3 million reported in the year-ago period. Further, the company now envisions earnings in the range of $3.65-$3.75 compared with $4.11 per share delivered in the prior-year quarter. The year-over-year decline in earnings is attributable to higher operating expenses on account of performance-based compensation.

What the Zacks Model Unveils?

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 +0.10% and carries a Zacks Rank #3. This makes us reasonably confident that it is likely to outperform estimates.

Other Stocks With Favorable Combination

Here are some 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:

Ross Stores, Inc. ROST has an Earnings ESP of +1.91% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tapestry, Inc. TPR has an Earnings ESP of +0.39% and a Zacks Rank #3.

Tiffany & Co. TIF has an Earnings ESP of +0.89% and a Zacks Rank #3.

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