TBL Timberland Co. (The)

Deckers Outdoor Corporation (DECK) is slated to report its fourth-quarter 2011 financial results on February 23, 2012. The Zacks Consensus Estimate for the quarter stands at $3.12 per share, representing an estimated year-over-year increase of about 37%. Revenue, as per the Zacks Consensus Estimate, is $562 million.

Previous Quarter Performance

Deckers delivered better-than-expected third-quarter 2011 results on the heels of healthy demand for the product lines under the UGG and Teva brands, and the acquisition of the Sanuk brand.

The quarterly earnings of $1.59 per share surpassed the Zacks Consensus Estimate of $1.34, and surged 48.6% from $1.07 in the prior-year quarter.

Deckers, which competes with Nike Inc. (NKE) and Timberland Co. (TBL), stated that total net sales jumped 49.1% to $414.4 million from the prior-year quarter, outpacing the Zacks Consensus Estimate of $389.0 million.

Agreement of Estimate Revisions

Analysts’ are positively biased about the company’s upcoming earnings. Of the 14 analysts covering the stock, 2 revised their estimates upward in the last 30 days, while one moved in the opposite direction. For fiscal 2011, 3 analysts revised their estimates upward while one lowered the same. 

Magnitude of Estimate Revisions

The company has not experienced any movement in fourth-quarter estimates over the last 30 days.

Some analysts remain cautious about the unseasonably warm winter, which is likely to hit the sales of UGG brand, one of the major revenue contributors to the company. Moreover, rising input costs are taking a toll on margins.  However, some analysts believe that sales of the brand are high irrespective of these uncertainties.

Positive Earnings Surprise History

With respect to earnings surprises, Deckers has topped the Zacks Consensus Estimate over the last four quarters in the range of 4.3% to 20.8%. The average remained at 14.5%. This suggests that Deckers has outperformed the Zacks Consensus Estimate by the same magnitude over the trailing four quarters.

Our View

Deckers, in order to seek better prospects and enhance its earnings potential, has taken a number of initiatives including diversification of merchandise offering, resumption  of distribution rights in significant geographic areas, rapid retail store openings, acquisition of Sanuk brand, and strengthening of eCommerce platform.

Deckers’ top line has increased at a CAGR of 35% in the last five years. The company’s robust growth in all its divisions and sustained focus on new product introductions along with geographic expansion have helped to achieve healthy results.

Further, the international markets provide a significant growth opportunity, and we remain optimistic about the company’s incremental sales and earnings potential. Internationally, the company distributes its products throughout Europe, Asia Pacific, Canada and Latin America.

However, we are cautious about the rising input costs and higher inventory, which will largely affect its margins in the near term. Deckers holds a Zacks #4 Rank, which translates into a short-term ‘Sell’ rating. However, considering the fundamentals, we are maintaining a long-term ‘Neutral’ recommendation on the stock.

 
DECKERS OUTDOOR (DECK): Free Stock Analysis Report
 
NIKE INC-B (NKE): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research