Analysts Bullish on Deckers

Deckers Outdoor Corp.’s shares were up more than 6 percent in afternoon trading on Friday after market watchers lauded the company’s financial performance for the three months ended March 31.

Analysts said the diluted earnings per share result for the period, which beat consensus forecasts by six cents, was driven by robust sales of the Ugg brand, greater-than-expected gross margin expansion and prudent expense management.

“As we anticipated, the extended cold winter helped drive sales of Ugg boots and slippers, while spring product has recently begun to sell well in warmer weather markets,” said Canaccord Genuity analyst Camilo Lyon in a note to clients.

“As such, inventory was down 18 percent, indicating a healthy position heading into the new fiscal year. In no uncertain terms, this was a solid, clean quarter,” he added.

Lyon said he thinks the company’s earnings per share growth guidance of 13.5 percent for the full year is conservative, based on the strength of Deckers’ more than 19 percent increase in backlog orders and the overall momentum in the business, particularly in the Ugg brand, both domestically and internationally.

Lyon has a full-year price target on the stock of $103.

Mitch Kummetz, an analyst at Baird Equity Research, echoed Lyon’s expectations around guidance. He said the company could experience earnings upside for the full year due to its conservative fall and winter cancellation and reorder assumptions.

Based on the company’s guidance hike, Kummetz raised his fiscal 2015 EPS estimate from $4.54 to $4.65. The Street is forecasting EPS for the period of $4.56.

“Management added that January and February were strong months for the boots and slippers businesses [and] the combination of cold and snowy conditions in many areas of the country and the company’s winter marketing campaign drove strong sales through the direct-to-consumer and wholesale channels, leading to out of stock positions in many more items,” Kummetz said.

“More recently, spring styles have picked up with the arrival of more seasonable weather,” he added.

Sam Poser, an analyst at Sterne Agee, also commented on the company’s modest guidance upgrade.

“The guidance is likely conservative as the increased backlog will not negate at-once orders as much as the company anticipates,” he said in a note to clients.

On the shift in the company’s financial reporting calendar, Poser said, “Deckers has changed its fiscal year end, effective April 1, 2014, from a December end to a March end to better capture all winter selling and provide a more accurate outlook.”

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