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Monness, Crespi, Hardt Upgrades Skechers USA to a ‘Buy’

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Price movement

Skechers USA (SKX) fell 2.7% to close at $24.48 per share during the third week of December 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -2.7%, 7.8%, and -19.0%, respectively, as of December 23.

SKX is trading 3.1% below its 20-day moving average, 6.8% above its 50-day moving average, and 8.2% below its 200-day moving average.

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Related ETF and peers

The SPDR S&P MidCap 400 ETF (MDY) invests 0.21% of its holdings in Skechers USA. The YTD price movement of MDY was 21.3% on December 23.

The market caps of Skechers USA’s competitors are as follows:

  • Nike (NKE): $87.1 billion
  • Columbia Sportswear (COLM): $4.0 billion
  • Steven Madden (SHOO): $2.3 billion

Skechers’ rating

On December 6, 2016, Monness, Crespi, Hardt upgraded Skechers USA’s rating to a “buy” from “neutral” and set the stock’s price target at $30 per share.

Performance in 3Q16

Skechers USA reported 3Q16 net sales of $942.4 million, a rise of 10.1% over $856.2 million in 3Q15. The rise was due to increased sales in its International Wholesale business and Global Retail business.

Between 3Q15 and 3Q16, the company’s gross profit margin expanded 40 basis points, while its earnings from operations narrowed 19 basis points. The expansion of its gross margin was due to wider domestic wholesale margins, which were offset by narrower global retail margins and the product sales mix.

The company’s net income and EPS (earnings per share) fell to $65.1 million and $0.42, respectively, in 3Q16 compared to $66.6 million and $0.43, respectively, in 3Q15. Skechers USA’s cash and cash equivalents rose 31.0%, and its inventories fell 15.6% between 4Q15 and 3Q16.

The company has projected net sales of $710.0 million–$735.0 million for fiscal 4Q16.

Next, let’s look at Greif (GEF).

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