North America

Earnings Preview: Deckers Outdoor Q1 2018 (DECK)

By: Craig Bowles

Overview

Deckers Outdoor, Corp. (DECK) is slated to report 1Q 2018 earnings after the bell on Thursday, July 27th. The earnings release is expected at approximately 4:00 p.m. ET followed by a 4:30 p.m. conference call available at Decker’s Investor Relations. The outdoor footwear and apparel company, most widely known for their UGG boots, also produces the Teva brand that’s popular among hikers and kayakers.

 

Outliers & Strategy

Key measures:

  • Non-GAAP/Ex-Items Earnings Per Share (EPS): Company guidance is a range of $(1.70) to $(1.65). The Street estimate is $(1.67). (Source: Yahoo! Finance) The company produced a “clean” earnings number before the past year. Consensus was $(1.74) three months ago.
  • Revenues: Company guidance is up low single digits y/y. Analysts expect a y/y increase of 2.4% to $178.54 mln. Consensus was $180.04 mln three months ago.
  • Adjusted Earnings Per Share (EPS) Guidance for 2Q2018: The Street estimate is $1.26.
  • Adjusted Earnings Per Share (EPS) Guidance for FY2018: Company guidance is $3.95 to $4.15. The current Street estimate is $4.04.
  • Revenue Guidance for 2Q2018: The Street estimate is down 0.7% y/y to $482.48 mln.
  • Revenue Guidance for FY2018: Company guidance is down 2% to flat. The current Street estimate is a 0.7% y/y increase to $1.78 bln.
  • Price/Book of 2.1 compares to a 5-year average of 2.6, Price/Sales of 1.1 compares to a 5-year average of 1.5, and Price/Cash Flow of 10.2 compares to a 5-year average of 12.7.
  • Analysts view Deckers with 5 Buy, 11 Hold, and 0 Sell ratings. (source: MarketBeat.com)
  • Deckers’ insiders bought a net 39,303 shares the last three months but sold a net 127,868 shares in the past year. (source: NASDAQ.com) Stock buybacks had been running at approximately $100 mln per year but last year had only $13 mln.
  • Deckers Outdoor results are compared to other shoe manufacturers, such as Nike (NKE) and Wolverine Worldwide (WWW).
  • Deckers shares have a 1-day average price change on earnings of 7.70%. Options are pricing in an implied move of 9.34% off earnings.

Recent News

  • 06/27: Activist investor Mick McGuire of Marcato Capital Management has threatened to replace Deckers’ board unless an ongoing strategic review process leads to a sale of the company, according to a post on Barron’s.com.
  • 06/08: Buckingham Research downgraded Deckers Outdoor to Neutral from Buy citing valuation concerns and limited near-term catalysts, according to a post on TheStreet.com.
  • 05/26: Canaccord Genuity reiterated a Buy rating on Deckers Outdoor citing the cost savings plan intended to generate $100M in incremental EBIT over the next three years, according to a post on StreetInsider.com.

Technical Review

2011 and 2014 found resistance when close to $100 and the stock moved down to the $20s in between, so the fear is a retest. The stock making lows every 3+ years suggests the next low is expected in 2019 if in keeping with cyclicality that’s been in place since 2009. Balance areas show resistance centered around $68 and support at $58. (Chart courtesy of StockCharts.com)

Summary

Marcato Capital is pushing for Deckers Outdoor to sell itself just over Dave Powers became CEO. Analysts haven’t shown much change in ratings. Insiders bought some shares the past three months. Deckers has beaten and missed consensus estimates by an average of 16c. Estimize consensus for a Non-GAAP EPS of $(1.64) on revenue of $179.91 mln compares to analyst consensus of $(1.67) on revenue of $178.54 mln. Guidance is important, as well.

 

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