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Earnings Preview: Puma, Under Armour, Skechers, Deckers

Will Under Armour outperform this week?

Puma, Under Armour, Skechers and Deckers will all report their third-quarter earnings this week. According to analysts, two of those companies may beat estimates, while the other two likely will not. Here’s what’s in store.
 
PUMA AG
The German sportswear maker’s shares have risen roughly 12 percent since it reported its second-quarter earnings, which went up 16 percent year-over-year.
 
However, analysts remain cautious going into the third quarter as second-quarter sales growth was a disappointing 2.5 percent despite a reportedly strong World Cup event.
 
Susquehanna Financial said in a research note that though Puma is seeing few revenue growth drivers, the company “should post in-line results with a possibility for slight upside” when it reports on Tuesday.
 
Susquehanna expects third-quarter earnings per share to be 5.01 euros, or $7 at current exchange, which assumes a 7 percent reported sales growth. Analysts expect full-year EPS of 15.5 euros, or $21.70, on revenue of 2.6 billion euros, or $3.6 billion, as polled by Yahoo Finance U.K.
 
“While management has done an admirable job controlling inventories and preserving its industry-leading profitability, this is unlikely to return margins to 2007 levels given brand investments, emerging FY11 headwinds (product costs) and few top-line catalysts in a non-event year,” added Christopher Svezia, analyst at Susquehanna.
 
UNDER ARMOUR INC.
Under Armour Inc.’s shares have risen 27 percent in the last quarter, touching 52-week highs, leading to rising expectations from investors.
 
On Tuesday, analysts are predicting third-quarter earnings per share of 60 cents on revenue of $322.2 million, as polled by Yahoo Finance.
 
“[We’re looking] for solid year-on-year order growth for cold-weather apparel, an emerging margin inflection point from [its] international segment [and] a multi-faceted margin improvement story for [the company’s] outlet business,” said UBS analyst Michael Binetti.
 
Susquehanna Financial’s Christopher Svezia said business trends have clearly improved for the company, which “should translate to higher top- and bottom-line growth rates over the next 18 months.”
 
Under Armour’s second-quarter net income more than doubled to $3.5 million, while its revenue surged 24 percent to $204.8 million.
 
SKECHERS USA INC.
The jury is still out on how far the toning trend will go.
 
As such, analysts caution that the deceleration of toning sales from the spring and possible erosion of Skechers USA Inc.’s market share may mean that the company will end the third quarter with higher-than-optimal inventory levels.
 
“Our conversations with industry contacts and subsequent store checks have uncovered a very promotional environment for first generation Shape-ups. The category overall continues to get more competitive [thus] threatening Skechers’ market share,” said Scott Krasik, analyst at BB&T Capital Markets, in a research note.
 
The company’s stock has fallen 36 percent in the last three months, and its sales need to accelerate into the holiday “to give retailers confidence in the category for 2011,” added Krasik.
 
For the firm’s third quarter, to be announced Wednesday, analysts are expecting earnings per share of $1.02, on revenue of $572.2 million, as polled by Yahoo Finance.
 
Skechers earned $40.2 million in the second quarter ended Jun 30, reversing its $5.9 million loss in the same period a year ago. Net sales for the second quarter were $504.9 million, up 69 percent from the year before.
 
DECKERS OUTDOOR CORP.
Analysts are upbeat on Deckers Outdoor Corp., which reports its third-quarter earnings this Thursday.
 
The maker of Ugg boots has seen its stock gain 6 percent in the third quarter, and has also topped profit expectations 14 quarters in a row, landing it as one of Sterne Agee's top stock picks for the year. And investors are expecting upside again.
 
“Based on the combination of strong expected sell-in and management’s history of giving conservative guidance, the consensus sentiment is that Deckers should beat the quarter handily,” said Scott Krasik at BB&T, in a research note.

Krasik added that retailers found fashion styles such as the Bailey Button Triplet, wood-bottom clog boots and riding boots have done well.

Analysts are forecasting third-quarter profit of 93 cents a share on revenue of $265.9 million, as polled by Yahoo Finance.
 
In the second quarter, Deckers’ net income was $9 million, up from $2.9 million in the second quarter of 2009, while revenue totaled $137.1 million, up 34 percent on the previous year.