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Factors Setting the Tone for Skechers (SKX) in Q4 Earnings

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Skechers U.S.A., Inc. (SKX - Free Report) is slated to release fourth-quarter 2017 results on Feb 8. In the trailing four quarters, it had underperformed the Zacks Consensus Estimate by an average of 7.8%. However, in the preceding quarter, it surpassed the consensus mark by 37.2%.

The question lingering in investors’ minds now is whether Skechers will be able to post positive earnings surprise in the fourth quarter. Let’s see how things are shaping up prior to this announcement.

What to Expect?

The company is likely to report bottom-line growth for the second straight quarter. The Zacks Consensus Estimate for earnings in the quarter under review is pegged at 13 cents compared with 4 cents in the previous year. Meanwhile, analysts polled by Zacks expect revenues of $875 million, reflecting more than 16% growth on a year-over-year basis.

Management had earlier projected fourth-quarter net sales in the band of $860-$885 million compared with $764.3 million in the prior-year quarter. Additionally, the company had envisioned earnings per share in the range of 9-14 cents compared with 4 cents in the year-ago period.

Factors at Play

Skechers’ greater emphasis on new line of products, store remodeling projects, cost containment efforts, inventory management and global distribution platform are the primary growth catalysts. Moreover, its e-commerce business has contributed toward sales growth. Notably, the company currently operates e-commerce sites in Chile, Germany and the UK, and has launched additional sites in Spain and Canada.

Skechers’ international business also remains a considerable sales growth driver for the company with Europe and China being the significant market outside the United States. Furthermore, the company is poised to enhance global reach in the footwear market through its distribution networks, subsidiaries and joint ventures (JVs).

However, analysts remain concerned about rise in selling, and general & administrative expenses that may hurt the company's margin and in turn the bottom line. We note that selling expenses have increased 37%, 31.6% and 32.1% in the first, second and third quarters of 2017, respectively. Following the same chronological order, general & administrative expenses were also up 16.6%, 25.5% and 21%, respectively. Nonetheless, the growth rate of general & administrative expenses has decelerated sequentially. Management expects the metric to decline further in the fourth quarter and the next year.

Skechers U.S.A., Inc. Price, Consensus and EPS Surprise

What the Zacks Model Unveils

Our proven model shows that Skechers is likely to beat estimates this quarter as the stock has the right combination of two key ingredients — a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen.

Skechers has an Earnings ESP of +7.69% and a Zacks Rank #3. This makes us reasonably confident of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks With Favorable Combination

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Ross Stores (ROST - Free Report) has an Earnings ESP of +2.45% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.  

G-III Apparel Group, Ltd. (GIII - Free Report) has an Earnings ESP of +14.29% and a Zacks Rank of 2.

Tiffany (TIF - Free Report) has an Earnings ESP of +0.89% and a Zacks Rank #3.

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