Why Skechers USA (SKX) Is Down Today

NEW YORK (TheStreet) -- Skechers USA  (SKX) was falling 7.25% to $27.14 on Tuesday after BB&T Capital Markets downgraded the stock to "hold" from "buy." The firm also removed its target price, which had previously been set at $33.

Analysts at Zacks also recently reaffirmed its Neutral rating and set a target price of $36. 

"[W]e still hold a somewhat conservative stance on the stock given the lower-than-expected results and maintain our unbiased view," the report reads. "Both the top and bottom lines of the company fell short of the Zacks Consensus Estimate. The quarterly earnings missed the Zacks Consensus Estimate by 13.1%, while revenue of $515.8 million fell short of the Zacks Consensus Estimate of $519 million."

Skechers had a volume of more than 1 million shortly after 1 p.m. EST on Tuesday, compared to its average of 414,211.

TheStreet Ratings team rates SKECHERS U S A INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate SKECHERS U S A INC (SKX) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, compelling growth in net income and good cash flow from operations. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • SKX's revenue growth has slightly outpaced the industry average of 18.4%. Since the same quarter one year prior, revenues rose by 20.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • SKX's debt-to-equity ratio is very low at 0.14 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, SKX has a quick ratio of 2.23, which demonstrates the ability of the company to cover short-term liquidity needs.
  • SKECHERS U S A INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, SKECHERS U S A INC turned its bottom line around by earning $0.19 versus -$1.39 in the prior year. This year, the market expects an improvement in earnings ($1.06 versus $0.19).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Textiles, Apparel & Luxury Goods industry. The net income increased by 144.0% when compared to the same quarter one year prior, rising from $11.00 million to $26.85 million.
  • Net operating cash flow has significantly increased by 125.80% to $15.63 million when compared to the same quarter last year. In addition, SKECHERS U S A INC has also vastly surpassed the industry average cash flow growth rate of -35.86%.
  • You can view the full analysis from the report here: SKX Ratings Report

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