Will Brown Shoe's Q4 Report Stomp Analyst Estimates?

Brown Shoe (CAL 1.18%), the global footwear retailer behind brands like Famous Footwear and Shoes.com, is about to release its fourth-quarter results to complete fiscal 2013. It has been a rough year so far for Brown Shoe's stock, as it has fallen more than 10%, but a strong report could propel shares back into the green.

Let's take a look at the most recent report and expectations for the upcoming results to determine if we should be buying right now or if we should wait to see what the company has to say. 

Source: Brown Shoe Co. Facebook Page

The last time out
On Nov. 26, Brown Shoe released its third-quarter report, and it was mixed compared to analyst expectations. Here's a breakdown of the results.

Source: Benzinga

Earnings per share increased 12.5% and revenue increased 1%, driven by Famous Footwear's comparable-store sales growing 4.9%. Brown Shoe noted that the back-to-school season was very successful at Famous Footwear, with comparable-store sales rising 5.6% during that 10-week period. The gross margin took a small hit, declining 50 basis points to 39.6% due to promotions, and the gross profit declined 0.4% to $278.2 million.

These were solid statistics, but the highlight was when Brown Shoe raised its guidance for the full year; the company now expects earnings per share of $1.36-$1.40 versus previous estimates of $1.27-$1.32. It also narrowed its revenue guidance to $2.53 billion-$2.54 billion, which is in-line with analyst expectations of $2.54 billion. 

The stock had little reaction to the mixed report, rising just 0.5% in the trading session, but it did rise to new highs over the next few weeks. This rally was short lived though, as shares have since fallen from their highs. The stock now sits more than 5% below the level it was at before the earnings release, including a decline of more than 10.5% year to date. With this said, the stock could turn right around and head back to those highs, and maybe even higher, if the fourth-quarter report can satisfy the Street.

Source: Brown Shoe Co.

Expectations and what to watch for
Fourth-quarter results are due out before the market opens on March 14. Here's an overview of the current consensus analyst estimates:

Source: Earnings Whisper

These expectations call for earnings per share to decrease 28.6% and revenue to decline 3% year over year, which would result in Brown Shoe's weakest quarter of the year. I believe the analysts have this one wrong. I expect the company will far exceed these estimates, driven by better-than-expected comparable-store sales at Famous Footwear and a large increase in online traffic at Shoes.com during the holiday shopping season.

However, the most important information to watch for will be its outlook on fiscal 2014; currently, analysts expect earnings per share in the range of $1.52-$1.70 on revenue of $2.5 billion-$2.7 billion. It is crucial for Brown Shoe to guide somewhere within this range; and if it can do this while delivering on earnings, we will likely see a large uptick in the stock price. 

Source: Skechers Corporate

A sign of things to come?
Skechers (SKX -0.79%) and Crocs (CROX -0.45%) are two brands sold by Brown Shoe and both have recently reported quarterly results of their own. Let's take a look at what each report held, as it will give us a good feeling for the current condition of the footwear-retail environment:

Skechers -- Feb. 12:

Source: Benzinga

Crocs -- Feb. 20:

Source: Associated Press

As you can see, the two companies exceeded expectations on both the top and bottom lines. Skechers cited increased demand for its products as the primary driver for its earnings beat, and the stock reacted by rising an incredible 19.3% on the day of the earnings release. Crocs noted its global expansion efforts as the key driver for its performance, and it believes its brand is well positioned to continue growing in the years ahead; its stock reacted positively as well, posting a gain of 5% on the day of the release.

The strong performance of these two brands is a good indicator for Brown Shoe, and I believe it adds to the reasoning for buying before the earnings release. 

Source: Crocs

The Foolish bottom line

Brown Shoe has widely underperformed the market in 2014, but a strong fourth-quarter report on March 14 could turn things right around. The current estimates are well within reason, and both Crocs and Skechers showed us that there was strong demand for footwear over the last several months. Foolish investors should strongly consider initiating a position right now, as I believe Brown Shoe will exceed expectations and rally higher over the course of the year.