Deckers Outdoor Corporation (DECK) first quarter earnings were $0.10/share ahead of the consensus forecast, and management (which is usually conservative) increased its guidance for full-year 2008. The company's UGG brand continues to drive its overall sales. In the first quarter, UGG brand sales grew an incredible 84% year-over-year.
DECK shares popped about 15% on the news. Even after that spike higher, DECK shares are still down about 11% year-to-date. We continue to believe the company's fundamental story, strong growth, and high visibility will enable its stock to outperform.
Based upon the company's first quarter results coupled with improved visibility into the second half of the year, the company currently expects its full-year revenue to increase approximately 31% over 2007, up from previous guidance of approximately 25%. The company currently expects its full-year diluted earnings per share to increase approximately 27% over 2007, up from previous guidance of approximately 20%. Fiscal 2008 guidance includes approximately $8.8 million of stock compensation expense.
Deckers Outdoor shares are currently trading at 18.2x our 2008 EPS estimate and 15.2x our 2009 EPS estimate. This multiple is well above the industry mean and median. In our view, the stock warrants a premium multiple relative to its industry peers, due to Deckers strong earnings growth and higher operating margins.
As such, we think the stock should trade at a P/E multiple of 25x our 2008 EPS estimate. This multiple is in-line with the company's long-term earnings growth rate. We reiterate our Buy rating on DECK shares and increase our target price from $135 to $162, which is 25x our 2008 EPS estimate.
Read the full analyst report on DECK.
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