Deckers Outdoor Preview: Did Cold Weather Boost Demand for UGG Boots?

Deckers Outdoor (NASDAQ: DECK) is scheduled to report its fourth quarter results on Thursday after the closing bell. The company is expected to earn $3.78 per share on revenue of $711.47 million.

On January 30, Under Armour reported a strong fourth quarter result driven by a surge in demand for gear that helps consumers escape the harsh cold weather. Will Deckers Outdoor report strong sales as the bitter cold weather across most of the U.S. boosted demand for its popular UGG boots brand?

Canaccord: Strength beyond the quarter

Camilo Lyon, analyst at Canaccord Genuity believes that a strong 2013 holiday season has given retail partners confidence in the boot category that will manifest in strong 2014 orders.

Lyon explained that following two years of unusually warm winters, demand has pent up for Uggs boots. “Our checks throughout the holiday season were consistently strong at both UGG retail stores and wholesale, as the backdrop of more than cooperative winter weather was a welcome change from the past two years,” the analyst explained in a note to clients on January 9.

Looking past the quarter, Lyon believes that Deckers is making progress on its gross margin expansion that is still in the early stages and should increase through 2015.

Lyon is forecasting Deckers to report an EPS of $3.90 and revenue of $726.7 million.

Shares are Buy rated with a $111 price target.

Related: Is Best Buy A 'Best Buy' Following Its Earnings?

S&P: Valuation issues, declining margins for 2013 a possibility

Jason Asaeda, analyst at S&P Capital IQ is concerned that Decker's operating margins face downside risk due to higher sheepskin costs and investments in new retail operations. The analyst expects margins to narrow to 12.7 percent in 2013 from 13.2 percent in 2012, but could wide to 13.9 percent in 2014 as the company shifts its raw materials to a lower cost Pure wool material.

Asaeda is forecasting Deckers to report an EPS of $3.64 with no revenue target.

Shares are Hold rated with a price target of $71, which is derived by applying a forward P/E multiple of 16x, in line with the company's 10-year historical and peer group averages.

Piper Jaffray: Unique story, positive bias

Erinn Murphy, senior research analyst at Piper Jaffray thinks that Decker's represents a unique story that stands out from retailers that faced considerable pressure due to severe cold weather. Brands like UGG could have benefited from increased show-room exposure, as retailers favored showcasing brands that offer consumers protection from brutally cold weather.

Looking past the quarter, Murphy noted three areas of strength that can boost shares in the longer term.

First, Murphy believes that Decker's could realize “significant” cost of goods sold (COGS) recovery which could extend through 2015. Second, Decker's hasn't yet realized its full international growth potential as only 30 percent of sales are outside of the United States. Finally, Decker's has a “solid order book” for the 2014 fall season and a “lean inventory.”

Murphy is forecasting Deckers to “handily beat” her $3.79 EPS estimate. Revenue is estimated at $797.0 million.

Shares are Overweight rated with a $96 price target.