Citi maintains Buy rating on Deckers Outdoor stock ahead of earnings

Investing.com - Citi has reiterated a Buy rating and $150.00 price target on Deckers Outdoor (NYSE:DECK) ahead of the company’s first-quarter earnings report scheduled for July 24. According to InvestingPro analysis, the stock appears undervalued at current levels, with a perfect Piotroski Score of 9 indicating strong financial health.

The investment bank expects Deckers to beat consensus earnings per share estimates, projecting $0.73 versus the consensus of $0.69. This anticipated outperformance is primarily attributed to stronger UGG sales and gross margin performance, which currently stands at a robust 57.9%. With a strong return on equity of 42% and more cash than debt on its balance sheet, InvestingPro data suggests the company is well-positioned for continued growth.

For the Hoka brand, Citi forecasts weaker direct-to-consumer performance than consensus estimates, projecting a 1% decline compared to the 6% growth expected by the broader market. This weakness stems from ongoing product transition disruptions affecting e-commerce traffic and average selling prices.

Despite DTC challenges, Citi still expects Hoka to outperform overall sales guidance, forecasting 13% growth compared to the company’s low-double-digit guidance. This outperformance would be driven by wholesale strength from strong reorder demand for new products.

While Citi acknowledges potential risks from Vietnam tariffs to Deckers’ previously communicated $150 million unmitigated tariff burden, the firm sees a favorable risk/reward profile heading into earnings due to negative market sentiment and existing concerns around Hoka sales. For deeper insights into DECK’s financial health and growth prospects, including 12 additional exclusive ProTips and comprehensive valuation metrics, visit InvestingPro for the full research report.

In other recent news, Deckers Outdoor has been the focus of multiple analyst reports following its latest earnings release. UBS analysts reiterated their Buy rating, expressing confidence that Deckers’ earnings per share will exceed market expectations, particularly with strong sales growth from the Hoka brand. They predict a low double-digit sales growth rate for Deckers, which could increase its forward price-to-earnings ratio. Meanwhile, Stifel maintained a Hold rating, noting that Deckers’ fourth-quarter performance surpassed expectations, with UGG brand revenues exceeding estimates. However, concerns were raised about Hoka’s sales, which fell short of consensus estimates.

BofA Securities adjusted its price target for Deckers to $128 while maintaining a Neutral rating, indicating concerns about Hoka’s ability to reignite growth in the U.S. market. Truist Securities also reduced its price target to $130 but kept a Buy rating, citing the lack of financial guidance from Deckers as a factor in investor uncertainty. Similarly, Williams Trading lowered its price target to $129, maintaining a Buy rating and highlighting the mixed performance in Deckers’ fourth-quarter earnings. Despite weaker-than-expected Hoka sales, Williams Trading noted strong sell-through rates and an expansion in Hoka’s product range.

Overall, the analyst reports reflect a cautious but varied outlook on Deckers’ future growth, with particular attention to the Hoka and UGG brands’ performance.

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