Deckers Outdoor Corp. (DECK), engaged in the designing, production, marketing, and brand management of footwear and accessories for outdoor activities, recently indicated that its Board has approved a stock split in the ratio of 3-for-1 in the form of common stock dividend. This is expected to be effective by July 2, 2010, for shareholders of record as of June 17, 2010.
According to stock split strategy, Deckers Outdoor will be able to increase its shares outstanding by lending out three shares for one share. This implies that three shares of Deckers Outdoor would be then valued at a price equivalent to the current price of one share of the company thereby keeping the market capitalization of the company intact.
Our Take
Deckers Outdoor’s decision to implement the stock split comes from the opinion that investors are overvaluing the stock and that a higher stock price is preventing new investors from buying. Since a split reduces a stock’s per-share price by increasing a percentage of outstanding shares, it consequently makes shares seem more affordable to small investors.
Estimate Trend Revision
Over the last 30 days, none of the 10 analysts covering Deckers Outdoor has revised its estimate for the second quarter of 2010. Currently, the Zacks Consensus Estimate for the second quarter is earnings of 29 cents a share.
Considering earnings surprises, the stock has been steady over the last 4 quarters, with all four positive surprises. The average remained positive at 119.1%. This implies that Deckers Outdoor has surpassed the Zacks Consensus Estimate by 119.1% over that period. The upside potential for the estimate in the second quarter, essentially a proxy for future earnings surprises, currently stands at 17.2%.
Read the full analyst report on “DECK”
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