Which Apparel Stocks have the Strongest Earnings Trends: Nike, Skechers, Deckers Outdoor, Under Armour or Crocs?

Earnings trends are extremely important when evaluating stocks. At Wall St. Cheat Sheet, we view increasing earnings quarter-over-quarter as a simple way to gauge whether costs and the business model are stable. Then we like to analyze whether the company is outperforming peers in the sector. This is what we call the “E-Squared” investment analysis (‘E = Earnings Are Increasing Quarter-Over-Quarter’ + ‘E = Excellent Relative Performance Versus Peers and Sector’).

Stocks with improving earnings metrics are worthy of your extra attention. Click here to discover our CHEAT SHEET stock picks now!

Here’s your Cheat Sheet to how the top 5 apparel stocks rank via earnings trends:

Skechers USA Inc. (NYSE:SKX): Current Price $21.91

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 1,441 1,436 2,007 1,606 1,560
Diluted EPS ($) 1.19 1.16 2.78 -1.39 0.19

We are concerned that revenue at Skechers has been tapering off after 2010, with EPS also obviously under pressure.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 283.25 351.27 384.00 429.43 395.62
Diluted EPS ($) -1.18 -0.07 -0.04 0.22 0.08

Quarterly revenue and EPS grew nicely up to September 2012, but fell off sharply in the last quarter. We’ll look elsewhere for more promising candidates…

Nike Inc. (NYSE:NKE): Current Price $54.84

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 18,630 19,180 19,010 20,860 24,130
Diluted EPS ($) 1.87 1.515 1.93 2.195 2.365

We like the upward trend in both revenue and EPS at Nike during 2011 and 2012.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Nov. 30, 2011 Feb. 29, 2012 May. 31, 2012 Aug. 31, 2012 Nov. 30, 2012
Revenue ($) in millions 5,546 5,846 6,655 6,669 5,955
Diluted EPS ($) 0.50 0.60 0.585 0.615 0.42

Unfortunately, we see a sharp deterioration in the company’s business in the November 2012 quarter with both sales and EPS dipping sharply. We’ll have to reject this one…

Under Armour, Inc. (NYSE:UA): Current Price $48.96

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 725.24 856.41 1,064 1,473 1,835
Diluted EPS ($) 0.38 0.46 0.67 0.925 1.21

We are impressed with the consistent growth in the top-line and profitability these past four years at Under Armour.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 403.13 384.39 369.47 575.20 505.86
Diluted EPS ($) 0.31 0.14 0.06 0.54 0.47

Quarterly revenue and EPS hit a new level in the September 2012 quarter, but lost a bit in December. We’ll look elsewhere…

CROCS Inc. (NASDAQ:CROX): Current Price $14.92

Fiscal Year 2007 2008 2009 2010 2011
Revenue ($) in millions 847.35 721.59 645.77 789.70 1,001
Diluted EPS ($) 2.00 -2.24 -0.49 0.76 1.24

Revenue and EPS are certainly looking up at Crocs after 2009, and we can see clear evidence of a turnaround.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 274.90 203.71 271.80 330.94 295.57
Diluted EPS ($) 0.33 0.06 0.31 0.68 0.49

On the quarterly front, we note the sharp uptick in revenue and EPS during the March and June 2012 quarters. Unfortunately, September 2012 was quite another story and we’ll drop Crocs…

Deckers Outdoor Corp. (NASDAQ:DECK): Current Price $43.65

Fiscal Year 2007 2008 2009 2010 2011
Revenue ($) in millions 448.93 689.44 813.18 1,001 1,377
Diluted EPS ($) 1.687 1.87 2.96 4.03 5.07

We see breakneck growth in revenue and EPS over the years under review. Both revenue and EPS have tripled between 2007 and 2011.

Next, our CHEAT SHEET investing framework asks us to drill down to the recent quarterly data:

Quarter Sep. 30, 2011 Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012
Revenue ($) in millions 414.36 603.85 246.31 174.44 376.39
Diluted EPS ($) 1.59 3.18 0.20 -0.53 1.18

Unfortunately, Deckers found itself on the ropes in the March and June 2012 quarters, reporting a massive fall in revenue and EPS. However, the company made a decent turnaround in September 2012, so we’ll keep it on the list for now…

Conclusion

We find that only Deckers Outdoor Corp increased earnings in the latest reported quarter and it therefore wins this round of ”E-Squared” investment analysis for apparel stocks.

“E = Earnings Are Increasing Quarter-Over-Quarter” is a core component of our successful CHEAT SHEET investing framework. Don’t waste another minute – click here to discover our CHEAT SHEET stock picks now!