On Tuesday, Citi maintained a Neutral rating on Deckers Outdoor (NYSE: NYSE:DECK) shares but increased the price target to $170 from $163. The adjustment reflects the firm's expectations of a strong second-quarter performance, primarily driven by robust sales from the company's Hoka brand and better gross margins (GM).
The company is anticipated to surpass consensus estimates with a second-quarter earnings per share (EPS) of $1.26, compared to the consensus of $1.21. This forecast is based on stronger-than-expected Hoka sales and improved gross margins. Management is also expected to update the full-year guidance favorably, reflecting lower-than-planned promotions for its UGG brand.
Despite the positive outlook for the quarter, the firm expressed caution regarding the near-term potential for UGG sales, citing challenging comparisons from the same quarter in the previous year. However, the underlying momentum for the UGG brand is believed to remain strong.
Hoka's performance is highlighted as a key driver for the company, with successful sales channels both in wholesale and direct-to-consumer (DTC) operations. The conservative gross margin guidance provided by management earlier in the year is now seen as a likely contributor to earnings upside.
While the short-term prospects for Deckers Outdoor shares appear positive leading into the second-quarter earnings release, Citi expressed a more cautious stance on the longer-term outlook. The potential for Nike (NYSE:NKE) to reclaim market share in the performance running segment could pose a challenge to Deckers Outdoor, possibly impacting the business and stock valuation.
In other recent news, Deckers Outdoor Corporation has seen significant developments, particularly in earnings and revenue results. The company reported a robust 22% increase in Q1 FY2025 revenues, largely due to a 30% surge in revenue from the HOKA brand and a 14% rise from the UGG brand, leading to an upward revision of Deckers' annual profit forecast.
Analysts from various firms including TD (TSX:TD) Cowen, UBS, and Truist Securities have expressed confidence in the company's continued strong performance, adjusting their price targets accordingly. However, Seaport Global Securities downgraded Deckers from "Buy" to "Neutral", expressing concerns about diminishing momentum for the HOKA and UGG brands.
Moreover, Deckers Outdoor underwent a 6-for-1 stock split, a move endorsed by analysts from Williams Trading and TD Cowen, who adjusted their price targets to reflect the new valuation. These are recent developments in the company's trajectory.
InvestingPro Insights
Recent data from InvestingPro adds depth to Citi's analysis of Deckers Outdoor (NYSE: DECK). The company's market capitalization stands at $24.51 billion, reflecting its significant presence in the footwear industry. Deckers' P/E ratio of 30.58 aligns with Citi's cautious stance on valuation, as it indicates a premium compared to industry averages.
InvestingPro Tips highlight Deckers' financial strength, noting that the company "holds more cash than debt on its balance sheet" and "liquid assets exceed short-term obligations." These factors support the firm's ability to navigate potential challenges in the UGG brand sales that Citi mentioned.
The company's robust performance is further evidenced by its impressive revenue growth of 20.3% over the last twelve months, with quarterly growth reaching 22.13% in Q1 2025. This data reinforces Citi's expectations of strong Hoka brand sales driving overall performance.
Interestingly, while Citi raised its price target to $170, InvestingPro data shows an analyst fair value target of $180, suggesting potential upside beyond Citi's revised estimate. However, investors should note that Deckers is "trading at a high earnings multiple," which may warrant caution in line with Citi's neutral rating.
For readers seeking a more comprehensive analysis, InvestingPro offers 14 additional tips for Deckers Outdoor, providing a deeper understanding of the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.