Stock Story -
What Happened: Shares of footwear and apparel conglomerate Deckers (NYSE:DECK) jumped 13.6% in the pre-market session after the company reported first-quarter earnings results that blew past analysts' constant currency revenue and EPS expectations, driven by huge outperformance at its Hoka ($533 million of revenue vs. estimates of $496 million) and UGG ($361 million of revenue vs. estimates of $318 million) brands.
On the other hand, its full-year EPS forecast was underwhelming. Still, this quarter's print was strong enough to mask the slightly weaker earnings outlook (especially considering its full-year revenue guidance was in line). Overall, this was a really good quarter that should please shareholders.
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What is the market telling us: Deckers's shares are not very volatile than the market average and over the last year have had only 6 moves greater than 5%. Moves this big are very rare for Deckers and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 3 months ago, when the stock gained 6.3% on the news that the S&P Dow Jones Indices announced that the company would join the index before the start of trading on Monday, March 18, 2024. The S&P 500 is a widely followed index that tracks the performance of the 500 largest companies in the United States. Being included in the index means that Deckers Outdoor will likely be held by many mutual funds and ETFs, which could potentially drive up demand for the stock.
We note that while buying of the stock could increase, this development does not change the fundamentals of the company. Revenue growth, expense efficiency, and capital intensity of the business, for instance, are not impacted by index inclusion or exclusion, so this is more of a technical tailwind for the stock.
Deckers is up 53.2% since the beginning of the year. Investors who bought $1,000 worth of Deckers's shares 5 years ago would now be looking at an investment worth $6,727.
