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Here's Why Skechers' (SKX) Q2 Earnings Are Poised to Grow

Skechers U.S.A., Inc. SKX is slated to release second-quarter 2019 results on Jul 18. This renowned footwear designer, marketer and distributor delivered a positive earnings surprise of 1.4% in the last reported quarter. The company outpaced the Zacks Consensus Estimate in three of the trailing four quarters, with the average beat being 5.6%. Let’s see what’s in store for the company this time around.

The Zacks Consensus Estimate for second-quarter earnings stands at 33 cents, indicating an improvement of roughly 13.8% from the year-ago quarter. We also note that the Zacks Consensus Estimate has remained unchanged in the past 30 days. Skechers witnessed a year-over-year decline of 5.3% in the first quarter.

The Zacks Consensus Estimate for revenues is pegged at $1,217 million, suggesting growth of approximately 7.2% from the year-ago reported figure. We note that total revenues of this California-based company increased 2.1% in the last reported quarter.

Factors Likely to Influence Skechers’ Performance

Skechers’ increased focus on new line of products, cost containment efforts, inventory management and global distribution platform are likely to have a favorable impact on the upcoming quarterly results. Moving on, Skechers’ e-commerce business continues to gain traction.

Moreover, Skechers’ international business remains a considerable sales growth driver for the company with Europe and China being significant markets outside the United States. Skechers is poised to enhance its global reach in the footwear market through its distribution networks, subsidiaries and JVs. Management expects international business to sustain growth momentum and increase at a mid-teen rate in the second quarter.

Further, Skechers completed the transition of Indian joint venture to a wholly owned subsidiary and entered into a deal to form a joint venture in Mexico with its current distribution partner. Both of these investments are expected to be accretive to 2019 earnings.

However, concern related to higher general & administrative expenses and sluggish domestic wholesale business cannot be ignored. We note that domestic wholesale business fell 10.9% during the first quarter of 2019. As a result, Skechers witnessed a decline of 6.3% in its domestic business. Management anticipates domestic wholesale business to be down mid-single-digits in the second quarter.

Skechers had earlier projected second-quarter 2019 earnings between 30 cents and 35 cents a share compared with 29 cents delivered in the year-ago period. Additionally, the company anticipates net sales in the band of $1.200-$1.225 billion compared with $1.135 billion reported in the prior-year quarter.

Skechers U.S.A., Inc. Price, Consensus and EPS Surprise

Skechers U.S.A., Inc. price-consensus-eps-surprise-chart | Skechers U.S.A., Inc. Quote

What the Zacks Model Unveils

Our proven model shows that Skechers is likely to beat estimates this quarter. A stock needs to have both — a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Skechers has a Zacks Rank #2 and an Earnings ESP of +6.06%. This makes us reasonably confident of an earnings beat.

3 More Stocks With a Favorable Combination

Here are three other companies you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat:

L Brands LB has an Earnings ESP of +0.89% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Abercrombie & Fitch ANF has an Earnings ESP of +5.37% and a Zacks Rank #3.

Children's Place PLCE has an Earnings ESP of +28.21% and a Zacks Rank #3.

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