On Friday, Baird maintained an Outperform rating on Deckers Outdoor (NYSE:DECK) and increased the price target to $1,050 from the previous $975. This adjustment comes after the company's fourth-quarter earnings per share (EPS) significantly exceeded consensus estimates by 75%, and the full-year 2024 actual growth surged by 51%, surpassing even the highest investor expectations.
Deckers Outdoor's recent financial performance has prompted Baird to adjust its forecasts for the company's fiscal years 2025 and 2026 EPS upwards by 3%. The firm's guidance for fiscal year 2025 anticipates a revenue increase of 10%, with the UGG and HOKA brands expected to grow by mid-single-digits and 20%, respectively. The EPS is projected to rise by 1-3%, factoring in an approximate 210 basis point EBIT margin retraction and no embedded share repurchases.
The analyst from Baird highlighted Deckers Outdoor's impressive track record, noting the company's compounded annual growth rate (CAGR) in revenue of high-teens over a four-year span. Additionally, the company boasts an operating margin exceeding 20% and a net cash position greater than $1.5 billion. These strong fundamentals are cited as the rationale for Deckers Outdoor's sustained premium valuation in the market.
Deckers Outdoor's performance and conservative guidance for the forthcoming fiscal year suggest a cautious yet positive outlook. The company's solid financial position and the potential for further positive earnings revisions underpin the analyst's confidence in maintaining a premium valuation for Deckers Outdoor shares.
InvestingPro Insights
The recent analysis by Baird aligns with several key metrics and insights from InvestingPro. Deckers Outdoor (NYSE:DECK) has demonstrated robust financial health, as indicated by its substantial cash reserves relative to debt, reinforcing the company's strong balance sheet. Additionally, with six analysts having revised their earnings upwards for the upcoming period, there is a consensus that Deckers Outdoor's growth trajectory remains positive.
InvestingPro data further enriches this perspective, showing a market capitalization of $23.22 billion and a Price/Earnings (P/E) ratio of 32.49, which, when considering the near-term earnings growth, suggests that the stock is trading at a low P/E ratio relative to its potential. Moreover, with a revenue growth of 15.34% over the last twelve months as of Q3 2024, Deckers Outdoor's financial performance is not only strong but also on an upward trend. The company's gross profit margin stands at an impressive 54.43%, underscoring efficient operations and cost management.
InvestingPro Tips indicate that Deckers Outdoor's cash flows can sufficiently cover interest payments, and the company's liquid assets exceed short-term obligations, which are vital considerations for investors looking for stable and secure investment options. Furthermore, the company is projected to be profitable this year, a sentiment echoed by Baird's positive outlook.
For investors seeking a deeper analysis and additional InvestingPro Tips, there are 15 more tips available on InvestingPro's platform for Deckers Outdoor. To access these insights and enhance your investment strategy, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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