Deckers Outdoor Corporation

Deckers Outdoor Corporation (DECK - Analyst Report) is that rare value stock that is also aggressively growing. Bill Wilton, Zacks Aggressive Growth Editor, discussed Deckers' record third-quarter results on Oct 27.

The company is running on all cylinders. It has surprised on estimates 4 consecutive quarters by an average of 26.12%. DECK is also cheap. It's trading at only 8.5x forward earnings.

Company Description

Deckers manufactures high performance footwear for outdoor activities as well as casual styles for every day living. The company has three brands: Teva, Simple and UGG.

UGG sheepskin boots from Australia were originally popular among the surfing crowd in Southern California but their popularity has now spread worldwide and the line has expanded to include shoes, clogs and slippers for men, women and children.

The Teva brand was initially known as a sports sandal but has expanded to include leather styles for men, women and children.

Sales Surge 52.5% in the Third Quarter

On Oct 23, Deckers reported its third-quarter earnings which beat Wall Street estimates by 8.24%. Earnings per share rose 34% to a record $1.97 from $1.47 in the third-quarter 2007.

Sales jumped 52.5% to $197.3 million from $129.4 million a year ago. Domestic sales held up well, increasing 40.9% to $162.3 million from $115.2 million in 2007.

Though a smaller segment of its sales, the international market also boomed, growing 146.7% to $35 million from $14.2 million a year ago.

The UGG brand powered the quarter, as sales climbed 57.1% to $178.7 million compared to $113.7 million in the year ago period. The increase was due primarily to an increase in orders from domestic retailers for the expanded fall line as well as higher shipments to international distributors.

The Simple brand saw sales rise 16.6% whereas the Teva brand came in the same as 2007.

Both eCommerce and the company's retail stores saw an increase in sales, 36% and 92.3%, respectively.

Full-Year 2008 Guidance Raised

Deckers is bullish about the fourth-quarter and the full year given the strength of its UGG brand even in a difficult economic environment. It is now forecasting full-year revenue to increase about 52% over 2007, up from its previous guidance of a 43% jump.

Deckers also expects EPS to rise 40% from Fiscal 2007's EPS of $5.06 per share. That would put the forecast in the range of $7.08.

Fourth-quarter guidance was also raised, with the company now expecting EPS to rise 44% from 2007 compared to its prior estimate of an increase of 42%.

Consensus Estimates Rise

Covering analysts have been scrambling to raise estimates in light of the company's great third-quarter. Fourth-quarter estimates gained 6 cents to $3.90 in the last 30 days.

Full-year estimates jumped 21 cents to $7.13 in the last month, which is slightly higher than the company's guidance.

Value Fundamentals

Deckers is trading at a cheap valuation of only 8.5x forward earnings. Its price-to-book is 2.66. The company has an outstanding 5-year return on equity (ROE) of 20.25%.

Read the full analyst report on DECK