12:32 PM EDT, 07/24/2024 (MT Newswires) -- Skechers USA ( SKX ) is likely to report a strong Q2, but rising freight costs might hurt annual profits, Wedbush said in a note Wednesday.

The demand continues to be strong for the company and given that it issued a conservative guidance that reflects an earnings per share 10% down year over year, Skechers should easily beat Q2 guidance.

However, "given the fact that freight rates have more than doubled since [Skechers] last reported, they might strike a more cautious tone on [second half] margins, particularly for Q4."

While strong demand and easier comparisons in the second half should support sales, investors should be cautious about expecting the same level of earnings growth as in previous quarters, Wedbush said. Guidance for the rest of the year will be closely watched, particularly on freight costs and their impact on gross margins.

Wedbush has an outperform rating on Skechers with a 12-month price target of $76.

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