Yahoo Finance Investing in Skechers (SKX) Ahead of Q1 Earnings: Risks & Rewards
As Skechers U.S.A., Inc. SKX gears up to unveil its first-quarter 2024 earnings results on Apr 25 after market close, investors find themselves at a crossroads, weighing the potential upsides and downsides of investing in this prominent footwear giant. With a track record of innovation, global expansion and solid financial performance, Skechers presents an intriguing investment opportunity. However, like any investment, it comes with its own set of challenges and uncertainties.
Analysts' expectations paint a promising picture for Skechers' upcoming earnings, with the Zacks Consensus Estimate for revenues standing at $2,186 million, which signals a notable 9.3% improvement from the prior-year figure.
Moreover, the company is anticipated to witness a year-over-year increase in its bottom line, with the consensus estimate for first-quarter earnings per share holding steady at $1.10 over the past 30 days. This forecast suggests an uptick of 7.8% from last year, hinting at potential earnings growth for Skechers amid a dynamic landscape.
Well, the decision to invest in Skechers ahead of its first-quarter earnings requires careful consideration of both potential rewards and inherent risks.
Assessing Skechers' Pros & Cons
Skechers' recent performance has been impressive, with the company achieving record annual sales of $8 billion in 2023. This growth trajectory was supported by robust quarterly sales records, including fourth-quarter revenues of $1,960.9 million. Such consistent sales growth underscores the strong demand for Skechers products globally, reflecting positively on the company's brand strength and market position.
Furthermore, Skechers' strategic initiatives, such as expanding into categories like football and basketball, demonstrate its commitment to innovation and diversification. Collaborations with top-tier athletes and celebrities, coupled with effective marketing campaigns, have helped elevate brand awareness and drive consumer engagement.
The company's direct-to-consumer segment also continues to show strength, surpassing 50% of total sales for the first time. We anticipate direct-to-consumer revenues to increase 18.7% in the first quarter. This growth is fueled by expected improvements of 15.7% and 20.8% in the domestic and international direct-to-consumer businesses, respectively.
Skechers' omnichannel strategy, along with its expanding retail footprint worldwide, positions it well to capitalize on evolving consumer preferences and shopping behaviors. Also, the company's focus on operational efficiency and cost management should support top and bottom-line growth.
While Skechers' growth prospects appear promising, investors must also consider the risks. One notable challenge is the decline in wholesale sales, particularly in the domestic market. Conservative inventory management by retailers and inventory congestion issues in certain regions have weighed on wholesale performance. Furthermore, macroeconomic factors such as inflation and higher interest rates pose potential challenges for Skechers, impacting consumer spending behavior and overall company performance.
Skechers U.S.A., Inc. Price, Consensus and EPS Surprise
Skechers U.S.A., Inc. price-consensus-eps-surprise-chart | Skechers U.S.A., Inc. Quote
Unlocking Value in Skechers
From a valuation perspective, Skechers shares present an attractive opportunity, trading at a discount relative to historical and industry benchmarks. With a forward 12-month price-to-earnings ratio of 14.94, below the five-year median of 15.24 and the Shoes and Retail Apparel industry’s average of 22.01, the stock offers compelling value for investors seeking exposure to the sector. Additionally, the stock currently has a Value Score of B, further validating its appeal.
Moreover, the growth trajectory for Skechers appears promising, with the Zacks Consensus Estimate for sales for the current and next fiscal year standing at $8.73 billion and $9.55 billion, respectively. These figures indicate year-over-year growth of 9.1% and 9.4%. Similarly, the consensus estimate for earnings per share is pegged at $3.81 and $4.37 for the same periods, which suggests an increase of 9.2% and 14.7%, respectively. These optimistic projections reinforce the value proposition of investing in Skechers.
What the Zacks Model Unveils
Our proven model conclusively predicts an earnings beat for Skechers 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, which is the case here.
Skechers currently has a Zacks Rank #3 and an Earnings ESP of +0.34%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
3 More Stocks With the Favorable Combination
Here are three more companies you may want to consider as our model shows that these, too, have the right combination of elements to post an earnings beat this season:
Tractor Supply Company TSCO currently has an Earnings ESP of +0.50% and a Zacks Rank #2. The company is expected to register a bottom-line increase when it reports first-quarter fiscal 2024 results. The Zacks Consensus Estimate for quarterly earnings per share of $1.70 suggests a rise of 3% from the year-ago quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
Tractor Supply Company’s top line is anticipated to advance year over year. The consensus mark for revenues is pegged at $3.40 billion, which implies an increase of 3% from the figure reported in the year-ago quarter. TSCO has a trailing four-quarter earnings surprise of 0.2%, on average.
Ross Stores ROST currently has an Earnings ESP of +0.34% and carries a Zacks Rank #3. The Zacks Consensus Estimate for first-quarter fiscal 2024 earnings per share is pegged at $1.34, up 22.9% year over year.
Ross Stores’ top line is expected to ascend year over year. The Zacks Consensus Estimate for quarterly revenues is pegged at $4.82 billion, which indicates an increase of 7.3% from the figure reported in the prior-year quarter. ROST has a trailing four-quarter earnings surprise of 9.1%, on average.
Deckers Outdoor Corporation DECK currently has an Earnings ESP of +16.99% and a Zacks Rank #3. The company is likely to register a bottom-line decrease when it reports fourth-quarter fiscal 2024 numbers. The Zacks Consensus Estimate for the quarterly earnings per share of $2.59 suggests a decline of 25.1% from the year-ago quarter.
Deckers’ top line is expected to rise year over year. The Zacks Consensus Estimate for quarterly revenues is pegged at $874.4 million, which indicates an increase of 10.5% from the figure reported in the prior-year quarter. DECK has a trailing four-quarter earnings surprise of 32.1%, on average.
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Tractor Supply Company (TSCO) : Free Stock Analysis Report
Skechers U.S.A., Inc. (SKX) : Free Stock Analysis Report
Deckers Outdoor Corporation (DECK) : Free Stock Analysis Report
Ross Stores, Inc. (ROST) : Free Stock Analysis Report
