Buy, Hold or Sell Deckers Stock? Key Tips Ahead of Q4 Earnings

As Deckers Outdoor Corporation DECK prepares to announce its fourth-quarter fiscal 2025 earnings results on May 22, after the market closes, investors are keen to assess the company's performance amid ongoing market challenges and opportunities. Deckers, known for its portfolio, including UGG and HOKA brands, has been navigating a dynamic landscape with strategic initiatives to sustain growth. The Zacks Consensus Estimate for revenues is pegged at $985.6 million, which indicates an improvement of 2.7% from the prior-year reported figure.However, the company is expected to witness a year-over-year decrease in its bottom line. Although the Zacks Consensus Estimate has increased by a penny over the past 30 days to 56 cents a share, it still suggests a decline of 32.5% from the year-ago period. Image Source: Zacks Investment ResearchDeckers has a trailing four-quarter earnings surprise of 36.3%, on average. In the last reported quarter, this Goleta, CA-based company’s bottom line outperformed the Zacks Consensus Estimate by a margin of 15.4%. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.) Deckers Outdoor Corporation Price, Consensus and EPS Surprise Deckers Outdoor Corporation price-consensus-eps-surprise-chart | Deckers Outdoor Corporation QuoteAs investors prepare for Deckers’ fourth-quarter announcement, the question of earnings beat or miss looms. Our proven model does not conclusively predict an earnings beat for Deckers this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. However, that’s not the case here. Deckers has an Earnings ESP of +14.90% but a Zacks Rank #4 (Sell). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. You can see the complete list of today’s Zacks #1 Rank stocks here.Key Factors to Observe for Deckers' Q4 EarningsDeckers’ fourth-quarter performance is expected to have been driven by its continued focus on innovation and brand expansion. The company has prioritized product development across its leading brands, HOKA and UGG, by launching new styles and limited-edition offerings that align with evolving consumer preferences. These efforts have helped sustain demand and maintain a strong brand presence across various channels. We expect revenues from the HOKA brand to increase 12.1% in the fourth quarter.Another significant factor contributing to revenue growth is Deckers’ expanding direct-to-consumer (DTC) channels. The company has been enhancing its online and in-store experiences, making it easier for consumers to access and purchase products. This strategy not only increases sales volumes but also allows Deckers to capture higher profit margins. Deckers is also gaining traction internationally, with expansion into key global markets forming a vital part of its long-term strategy.Despite these positives, Deckers faced some notable headwinds. A primary concern is inventory availability, especially for UGG. Accelerated order fulfillment earlier in the fiscal year led to constrained inventory levels, limiting sales during the fourth quarter. Management has already flagged a difficult year-over-year comparison for UGG, which grew 16.1% in the third quarter. Our model suggests a 13.2% decline in UGG sales in the final quarter, which is likely to have led to a deceleration in top-line growth.Further, elevated markdowns and increased promotional efforts, particularly surrounding HOKA, are expected to have hurt margins. Profitability is likely to have been impacted by external cost headwinds, including an estimated 150 basis points from higher freight expenses and approximately 50 basis points from unfavorable foreign exchange movements. We expect the gross margin to contract 320 basis points in the final quarter. Challenges in the SG&A domain are expected to further compress margins. We expect SG&A expenses, as a percentage of net sales, to deleverage 290 basis points, with the operating margin expected to contract 610 basis points.Deckers Stock Price PerformanceShares of Deckers have declined 13.1% over the past three months against the Retail-Apparel and Shoes industry's rise of 3.9%. DECK stock has even underperformed its peers, including Boot Barn Holdings, Inc. BOOT, Adidas ADDYY and Skechers U.S.A., Inc. SKX. While shares of Boot Barn have jumped 25.4%, Adidas and Skechers have fallen 3.4% and 1.6%, respectively. Image Source: Zacks Investment ResearchDoes Deckers Present a Strong Case for Value Investing?Deckers is currently trading at a forward 12-month price-to-earnings (P/E) multiple of 19.47X, which positions it at a premium compared to the industry’s average of 17.96X. The stock is trading below its median P/E level of 28.53, observed over the past year. DECK is trading at a discount to Boot Barn and Adidas, which have a forward 12-month P/E of 25.30 and 24.90, respectively. However, it is trading at a premium to Skechers, which has a forward 12-month P/E of 16.71  Image Source: Zacks Investment ResearchHow to Play DECK Stock Now: Buy, Hold or Sell?Deckers heads into its fourth-quarter earnings release amid a tug-of-war between growth momentum in key brands and operational pressures that could impact profitability. The company’s long-term strategies appear well-aligned with consumer trends, but near-term challenges such as inventory limitations and margin compression warrant caution. As such, investors may find it prudent to stay on the sidelines until greater clarity emerges from the upcoming earnings outcome.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Skechers U.S.A., Inc. (SKX): Free Stock Analysis Report Deckers Outdoor Corporation (DECK): Free Stock Analysis Report Boot Barn Holdings, Inc. (BOOT): Free Stock Analysis Report Adidas AG (ADDYY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks