On Tuesday, Evercore ISI maintained its Outperform rating on Skechers USA (NYSE:SKX) with a steady price target of $72.00. The firm's analysis suggests that while the market anticipates a slight earnings per share (EPS) increase beyond the guidance range of $1.10 to $1.15, with consensus estimates at $1.16, there might be concerns regarding gross margin expansion and selling, general, and administrative (SG&A) expenses.
The company, which presented at the recent Wells Fargo Conference, indicated that the second half gross margins are not expected to see the 100-200 basis points expansion previously hoped for, but should instead show a more modest regular increase. This tempered expectation follows a second quarter performance where Skechers' gross margins exceeded market predictions by approximately 150 basis points.
Despite the cautious outlook on gross margin growth, Evercore ISI's stance suggests confidence in the company's overall performance. The analyst noted potential risks of SG&A deleverage, which could affect profitability if costs rise faster than sales.
Skechers, a global footwear company, has been navigating a challenging retail environment, with various factors influencing its operational efficiency and profit margins. The analyst's reiteration of the Outperform rating indicates a positive view of the company's ability to manage these challenges.
In other recent news, Skechers USA Inc . witnessed a surge in its Q2 sales, recording a figure of $2.16 billion, marking a 7.2% increase year-over-year. This growth was attributed to robust demand for the company's products across all regions and segments, despite facing supply chain disruptions and economic challenges.
TD Cowen and Williams Trading, both maintained a Buy rating on Skechers, with the former raising the price target to $78 and the latter keeping it steady at $80.00. Both firms acknowledged Skechers' growing global market share and anticipated acceleration in its operations.
Skechers' management displayed optimism about the company's performance in the second half of the year, despite slight misses in Q2 sales and earnings per share (EPS) expectations due to challenges such as foreign exchange rates and supply chain delays. In addition to these milestones, Skechers announced a new $1 billion share repurchase plan and increased its full-year sales guidance to between $8.875 billion and $8.975 billion, indicating confidence in its growth trajectory.
InvestingPro Insights
Skechers' financial health appears robust, aligning with Evercore ISI's Outperform rating. According to InvestingPro data, the company's revenue growth stands at 8.02% over the last twelve months, with a notable EBITDA growth of 27.05% during the same period. This growth trajectory supports the analyst's positive outlook on the company's performance.
InvestingPro Tips highlight that Skechers is trading at a low P/E ratio relative to its near-term earnings growth, with a current P/E ratio of 16.73. This suggests that the stock may be undervalued, potentially offering an attractive entry point for investors despite the cautious outlook on gross margin expansion.
Additionally, Skechers operates with a moderate level of debt and has liquid assets exceeding short-term obligations, indicating financial stability. This solid financial footing could provide the company with flexibility to navigate the challenging retail environment and potential SG&A deleverage risks mentioned in the article.
For investors seeking more comprehensive analysis, InvestingPro offers 7 additional tips for Skechers, providing deeper insights into the company's financial position and market performance.
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