The 2024 Q2 earnings season has been positive so far, reflecting resilience and positive growth. The trend is anticipated to continue in the upcoming periods, fueled notably by the Tech sector’s strong contribution, consistent with past quarters. Several companies are reporting margin expansion, leading to enhanced profitability.
The Defensive Nature of Kimberly-Clark
Kimberly-Clark (KMB) stands out for its defensive attributes due to its positioning in the consumer staples sector. These companies demonstrate the ability to generate reliable demand even in challenging economic conditions. With a Zacks Rank #2 (Buy), KMB has seen a significant increase in earnings expectations for the current fiscal year following recent guidance enhancements.
The utilization of cost management practices has substantially boosted the company’s profitability. In its latest quarter, adjusted EPS climbed by 20% year-over-year to $1.96, showcasing impressive margin expansion.
Deckers Outdoor Brand Momentum
Deckers Outdoor (DECK) has maintained its brand momentum with popular products like UGG and Hoka shoes, driving robust results and prompting an upward revision in its current fiscal year outlook. Analysts have adjusted their outlook accordingly, with the Zacks Consensus EPS estimate of $31.52 indicating an 8% growth year-over-year.
Continued margin expansion has been a consistent feature for Deckers Outdoor, contributing to a positive profitability outlook. The company’s gross margin expanded to 56.9%, a notable increase from the year-ago period.
Skechers’ Record Sales and Challenges
Skechers (SKX) faced challenges in its latest quarterly release, witnessing a 7% decline in EPS despite a 7% increase in sales. Both figures fell short of Zacks Consensus estimates, breaking a trend of positive surprises. However, the quarterly sales of $2.2 billion marked a record for the company, with Direct-to-Consumer (DTC) sales growing by an impressive 9.2% year-over-year.
The positive aspect of DTC sales growth indicates a strong market position for Skechers, despite the recent EPS miss. Like DECK, Skechers also experienced margin expansion, benefiting from reduced freight and unit costs. Gross margin improved by 220 basis points to 54.9%.
Conclusion
The Q2 earnings season has seen several companies, including Deckers Outdoor (DECK), Kimberly-Clark (KMB), and Skechers (SKX), unlock higher profitability and demonstrate resilience amid economic challenges. These successes reflect sustained efforts in cost management and product innovation, positioning these companies for continued growth.