What happened

Shares of Skechers USA Inc. (NYSE:SKX) were flying higher last month thanks to a surprisingly strong third-quarter earnings report. According to data from S&P Global Market Intelligence, shares of the casual-footwear specialist finished the month 27% higher.

Skechers raced past estimates on the top and bottom lines as the company seemed to finally overcome previous inventory overhangs and issues in its domestic wholesale business. As the chart below shows, the stock skyrocketed on the Oct. 20 earnings report and even gave back some of those gains after the results came out.

SKX Chart

SKX data by YCharts

So what

For the first time in several quarters, the company actually grew earnings, helped by brisk revenue growth. Net sales increased 16.2% to $1.095 billion in the period, ahead of estimates at $1.07 billion, and on the bottom line, earnings per share increased from $0.42 to $0.59, crushing expectations at $0.43, as gross margin expanded 190 basis points to 47.5%.

Sales increased across all three of Skechers' segments: retail, domestic wholesale, and international wholesale. Retail was particularly strong, increasing 18.6% on 4.4% comparable sales growth, overcoming store closures due to hurricanes. International wholesale revenue also soared, up 25.7%, while domestic wholesale ticked up 1.4%.

A pair of Skechers shoes with fireworks in the background.

Image source: Sketchers.

Now what

Management expected growth to continue into the fourth quarter, calling for revenue of $860 million to $885 million, or an increase of 14% at the midpoint, and EPS of $0.09 to $0.14, up from $0.04 a year ago. That outlook was within range of the analyst consensus on both.

With gross margin improving, profit growth could continue to outpace revenue growth, and even after the post-earnings surge, Skechers offers considerable value. Based on next year's EPS forecast, the stock is trading at a P/E of less than 15. If management can execute on is growth, shares should continue to rise.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Skechers. The Motley Fool has a disclosure policy.