Skullcandy Beats on Revenue, Matches Expectations on EPS

Skullcandy (Nasdaq: SKUL  ) reported earnings on Nov. 1. Here are the numbers you need to know.

The 10-second takeaway
For the quarter ended Sep. 30 (Q3), Skullcandy beat slightly on revenues and met expectations on earnings per share.

Compared to the prior-year quarter, revenue grew significantly and GAAP earnings per share grew significantly.

Gross margins dropped, operating margins increased, net margins expanded.

Revenue details
Skullcandy recorded revenue of $71.0 million. The nine analysts polled by S&P Capital IQ predicted sales of $69.9 million on the same basis. GAAP reported sales were 17% higher than the prior-year quarter's $60.6 million.

Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.

EPS details
EPS came in at $0.23. The 10 earnings estimates compiled by S&P Capital IQ anticipated $0.23 per share. GAAP EPS of $0.23 for Q3 were 475% higher than the prior-year quarter's $0.04 per share.

Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Margin details
For the quarter, gross margin was 48.0%, 30 basis points worse than the prior-year quarter. Operating margin was 15.0%, 60 basis points better than the prior-year quarter. Net margin was 9.1%, 750 basis points better than the prior-year quarter.

Looking ahead
Next quarter's average estimate for revenue is $103.1 million. On the bottom line, the average EPS estimate is $0.59.

Next year's average estimate for revenue is $298.9 million. The average EPS estimate is $1.13.

Investor sentiment
The stock has a two-star rating (out of five) at Motley Fool CAPS, with 157 members out of 185 rating the stock outperform, and 28 members rating it underperform. Among 54 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 38 give Skullcandy a green thumbs-up, and 16 give it a red thumbs-down.

Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Skullcandy is outperform, with an average price target of $20.80.

Seth Jayson had no position in any company mentioned here at the time of publication. You can view his stock holdings here. He is co-advisor of Motley Fool Hidden Gems, which provides new small-cap ideas every month, backed by a real-money portfolio. The Motley Fool owns shares of SKULLCANDY INC. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 02, 2012, at 1:45 PM, daillengineer wrote:

    we can all read an earnings release. why don't you give us your take on this stock?

  • Report this Comment On November 02, 2012, at 2:18 PM, fiftyone49 wrote:

    Here's my two cents for whoever wants to listen... A large criticism this earnings season has been although companies have beat on the bottom line, revenues have been slowing. This shows that although there may not be as much demand, these companies are being innovative and finding ways to cut costs and increase margins. Skul has been showing consistent increase in demand for their products. Although their guidance in regards to eps was cut, the revenue has remained the same and even improved on the low end.

    Many companies as young as skul do not even turn a profit in early years as they begin to build their brand. While profitability may suffer slightly in the near term for skul, I think this shows managements ability to diversify their product offerings and make new innovative products. The whole argument from the street for skullcandy is that it is a fad and will fade. I believe that these numbers show just the opposite.

    While the street has long hated this stock and may continue to do so, eventually you have to admit that there is demand for the product and management knows its market.

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