Monday, May 19, 2014
Investing in Footwear Earnings Growth
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Although many retail names were hit hard by the cold weather, a few have managed to post strong results. Interestingly, the footwear segment has been an especially strong performer with a number of companies in this space beating out results.
One such company that is a great example of this trend is undoubtedly Skechers (SKX - Trend Report), a California-based firm that is now up nearly 100% over the past year. Yet with such a strong performance, investors might we wondering if the good times can continue for SKX, especially given the rocky trading in a number of other surging names.
Fortunately, there are plenty of reasons to be optimistic about this stock for the long haul, though investors may first want to look at the recent earnings from SKX to get a better picture of the trends in place.
For the most recent earnings report, SKX absolutely crushed the consensus estimate. Earnings came in at 61 cents a share, far better than the 33 cent per share profit that analysts were expecting. This follows up a strong beat for SKX to close out 2013, and it actually helped to push the average beat over the last four quarters to a truly impressive 125%.
The company is looking to expand its store count this year, and given its strong performance in an otherwise difficult quarter for retail, many analysts are starting to raise their estimates for SKX’s full year outlook. In fact, in the past sixty days not a single estimate has gone lower on Skechers for either the current year or next year time periods.
Estimates in Focus
The magnitude of the earnings estimate revisions have also been impressive, as the consensus estimate has surged up to a point that the company is now projected to see earnings growth of 90% for the current year. The current year consensus has actually moved from $1.81/share 30 days ago to $2.06/share today, while investors have noticed a similar increase for the next ear period too. For that time frame, estimates have moved from $2.24/share 60 days ago to $2.69/share today, suggesting that the long term future for SKX is looking pretty bright.
Thanks to these factors, SKX has earned itself a Zacks Rank #1 (Strong Buy), meaning that it is in rare company from this earnings estimate revision perspective. And according to our research, companies with such favorable metrics on this front tend to outperform the market by a very wide margin.
If this wasn’t enough for investors, it is also worth pointing out that SKX’s industry of retail shoes apparel is ranked in the top 20% of all industries, so there are definitely some positive trends in place for this outperforming corner of the market. Plus, when you add in the fact that SKX is currently the only stock that has a ‘Strong Buy’ rating in the industry, and it becomes clear that Skechers should be a top pick for your portfolio.
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