Deckers Outdoor Corp. - Momentum

Deckers Outdoor Corp. (DECK) recently surged to a new all-time high ahead of the holidays after reporting strong Q3 results in late October that included a 15% earnings surprise. With an average earnings surprise of 54% over the last four quarters and 11% growth projection, this Zacks #1 rank stock has momentum to boot.

Company Description

Deckers Outdoor Corp. designs, manufactures and sells footwear and accessories for men, women and children worldwide. The company was founded in 1973 and has a market cap of $2.8 billion.

Although DECK has rebounded nicely out of the recession of 2009 on growing consumer confidence, shares got an extra boost on Oct 30 after reporting solid Q3 results that handily beat expectations.

Third-Quarter Results

Revenue for the period was up 22% from last year to $278 million. Earnings also came in strong at $1.07, 15% ahead of the Zacks Consensus Estimate, where the company now has an average earnings surprise of 56% over the last four quarters.

Deckers' largest and most popular segment, UGG brand, saw sales increase 20% from last year to $256 million. Its biggest gains however came from its Teva Brand, where sales were up 52% to $13.7 million. The company also scored on the international front, with sales up 63% to $20 million.

Not only did Deckers see strong top line growth, it was also able to reduce its costs, with gross margin expanding 420Bps to 47.1%.

Share Repurchase

The company has also been busy returning value to its shareholders, buying back 170.000 shares during the quarter for $7.4 million, with $20 million remaining from an original authorization of $50 million.

Estimates

We saw some decent movement in estimates on the good quarter, with the current year up 16 cents to $3.68 and the next-year estimate adding 15 cents to $4.09, a solid 11% growth projection.

Valuation

In light of the recent gains, DECK's forward P/E of 20X is a premium to the industry average of 15X.

2-Year Chart

On the chart, shares recently hit a new all-time high after surging on the good quarter. The MACD below the chart is bullish too, with the short-term average advancing ahead of the long-term average. Look for support from the previous breakout area at $63 on any weakness. Take a look below.

Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the new Zacks Momentum Trader Service.
 
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