Deckers Outdoor (DECK – Analyst Report) designs, markets, and distributes footwear, apparel, and accessories for casual lifestyle use. The company offers luxurious comfort footwear, handbags, apparel, home, and cold weather accessories under the UGG brand name; casual sandals, shoes, and boots under the Teva brand name; and action sport footwear under the Sanuk brand name. Deckers is the Bear of the Day after falling to a Zacks Rank #5 (Strong Sell).
The company has a market cap of $1.6 Billion with a PE of 12 and pays no dividend. The stock has Zacks Style Scores of “B” in both Value and Growth, but a “C” in momentum. The company resides in an industry ranked 219 out of 265 (Bottom 17%) of the Zacks Industry Rank.
Earnings and guidance
On October 27th, Deckers reported earnings that caused the stock to initially pop. But after further examination, traders have sold since, due to poor guidance and falling estimates.
The second quarter EPS came in at $1.21 versus the $1.19 expected, with revenues coming in below the $499 Million expected at $485 Million. The company guided Q3 lower, seeing $4.16-4.28 versus the $4.58 expected and sees revenue down 2% year over year. They also cut fiscal year 2017 range to $4.05-4.25 versus their prior target of $4.32 and revenues are expected down 1.5-3%.
CEO David Powers was upbeat on the conference call: “We are pleased with the results of our second quarter and the progress on our plans for the year, said Dave Powers, President and Chief Executive Officer. Despite a challenging consumer environment, we delivered earnings per share results that were higher than last year and at the top end of our expectations. Looking ahead, our teams are prepared for the upcoming selling season, and we are excited about our fall and holiday product and marketing plans.”
However, the price action since EPS has shown that investors aren’t as upbeat. The stock has fallen 10% since and now threatens the to break the $50. A breach of this level could threaten the stock to fall to 2016 lows just over $40.
Estimates and revisions
Looking at company’s revisions investors can see how this move lower might happen. In just the last 7 days, estimates for 2017 have been taken 3.3% lower. While estimates for 2018 have been taken 6% lower. As estimates continue to fall, expect the stock price to fall as well.
A Better option
Francesca (FRAN – Snapshot Report) is a Zacks Rank #1 (Strong Buy) and a smarter choice than Deckers.The company is a specialty retailer of women’s apparel products that operates a chain of retail boutiques in the United States. Analysts have been revising estimates higher over the last 60 days, for both fiscal years 2016 and 2017. The stock has rallied back from its plunge back in May and is up over 50% since.
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