Will Wall Street See A Q4 Earnings Beat From Deckers (DECK)?

Deckers Outdoor Corporation (NYSE:DECK) is slated to report fourth-quarter fiscal 2018 results on May 24. In the trailing four quarters, this Goleta, CA-based footwear and apparel retailer has outperformed the Zacks Consensus Estimate by an average of 96.4%. In the last reported quarter, the company delivered a positive earnings surprise of 29.4%.

Investors are counting on another beat by Deckers in the to-be-reported quarter. Let’s delve deeper and take a look at the factors that will be influencing the results.

Here Are the Deciding Factors

Deckers is targeting profitable markets and remains focused on product innovations as well as store augmentation plan. Also, the company’s focus on expanding brand assortments, bringing more innovative line of products, targeting consumers through marketing and optimizing omni-channel distribution bode well. In keeping with the changing trends, Deckers has made substantial investments to strengthen online presence and opening smaller concept omni-channel outlets.

Additionally, the company has undertaken strategic initiatives in an effort to drive long-term growth. Its store-fleet optimization plan focuses on striking the right balance between digital and physical stores. Deckers also expects cost savings of about $150 million backed by improvement in cost of goods sold and SG&A savings, which includes consolidation of retail outlets and process improvement efficiencies. This in turn should help it realize $100-million operating profit improvement by fiscal 2020.

Management had earlier guided fourth quarter net sales in the range of $370-$375 million compared with $369.5 million reported in the year-ago period. The company had forecasted earnings in the range of approximately 15-20 cents compared with 11 cents a share delivered in the prior-year quarter.

However, industry experts remain concerned about Deckers' over-reliance on the UGG brand. In the event of stagnation or decline of UGG sales growth, the company's overall results will be adversely affected. This is because the percentage of contribution from the company’s other brands are too minimal to offset any slowdown in UGG sales.

How Are Top & Bottom Line Estimates Faring?

After registering a bottom-line increase of 21% in the third quarter of fiscal 2018, Deckers is likely to record year-over-year growth of more than 60% in the fourth quarter. The Zacks Consensus Estimate for the quarter under review is pegged at 18 cents compared with 11 cents reported in the year-ago quarter. We note that the Zacks Consensus Estimate has been stable in the last 30 days. Analysts polled by Zacks now project revenues of $377.3 million, up approximately 2% from the year-ago quarter.

If all goes well, this will be the fifth straight quarter that the company will surpass the Zacks Consensus Estimate for both the top and bottom lines.

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 +23.37% and 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:

Best Buy (NYSE:BBY) has an Earnings ESP of +2.01% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Costco (NASDAQ:COST) has an Earnings ESP of +1.39% and a Zacks Rank #3.

Kroger (NYSE:KR) has an Earnings ESP of +3.94% and a Zacks Rank #3.

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