Deckers Outdoor Corporation (NYSE: BRIDGE) the ability to boost earnings and higher earnings forecasts are prompting analysts to re-evaluate price targets.
For its fourth fiscal quarter, the Goleta, Georgia-based shoe designer reported GAAP EPS of $2.51, nearly double analysts’ expectation, while a 31.1% acceleration in revenue to $736 million beat analyst consensus of $96.19 million.
Based on this strength, management indicated that the upcoming exercise will only build momentum. This includes a jump in net sales to a range of $3.45 billion to $3.5 billion from $3.1 billion in fiscal 2022, an expansion in gross margins despite inflationary concerns and a jump of $2 in diluted earnings per share over fiscal 2022 if the upper end of the guidance is reached.
“Fiscal 2022 was another banner year for Deckers as we delivered revenue and earnings per share growth of over twenty percent,” CEO Dave Powers said. President and CEO. “I’m incredibly proud of our performance over the past two years, but with the power of our brands and people, I’m even more excited about the opportunities ahead.”
Shares rose more than 11% in the second half of Friday’s U.S. trading day on the bull report and forecast. The strong earnings also prompted broad reassessments of price targets on Wall Street after the magnitude of the earnings beat surprised many analysts.
“The [fourth quarter] showed strong growth from UGG and HOKA to cap off another stellar year,” Stifel analyst Jim Duffy wrote in an update note on Friday. “Our audits show that demand for HOKA continues to outstrip supply, particularly for the launch product, underscoring the growth of a loyal brand.”
He rated the stock as overvalued relative to its peers and, given the bullish direction, reiterated a “Buy” rating on the stock and raised its price target to $338.
Duffy wasn’t the only one pushing the estimates up either. Cowen analyst John Kernan was also encouraged by the earnings result and said the stock still presented a significant opportunity after its post-earnings rally.
“The stock has some of the best risk/reward in the entire Softlines space as management execution far exceeds that of its industry peers and guidance could prove conservative,” he wrote on Friday. .
He added that, in a bullish deal, a stock price of $500 is achievable for Decker Outdoor (DECK +10.0%). As such, Kernan raised its base target price to $407 per share from an earlier target of $358.
Finally, UBS analyst Jay Sole set a target of $540 for the stock, as he called it one of the best softline growth stocks. He added that he expects stocks to rise as much as 138% as the market undervalues management’s ability to weather macro headwinds.
That said, the response to earnings results hasn’t been completely adulation. Indeed, while many analysts applauded management’s execution, caution remained present on particular points found in the print.
“It was a very strong impression, especially in light of the continued supply chain disruptions and macro headwinds,” Wedbush analyst Tom Nikic acknowledged. “The only real ‘hole’ to pierce is UGG’s increased shipments in the fourth quarter, which will likely hurt revenue in the fall.”
Due to this impact, he indicated that he could not improve the stock despite a more bullish reading. In fact, Nikic instead lowered his price target to $292 in part due to apprehension over the fall forecast.
Price targets were also reduced at Telsey Advisory and Jefferies as some fussy margins and supply chain headwinds hit estimates. Both nonetheless retained “Buy” ratings on the stock, simply limiting upside targets rather than altering sentiment on the stock.
Freight headwinds and supply chain delays continue to weigh on margins, but all businesses are witnessing these pressures and DECK is taking action to mitigate these challenges,” commented a team of analysts from Jefferies. . “We recommend buying DECK while the valuation is moderate.”
Read the earnings call transcript.