Back-to-back quarters of positive earnings surprises along
with an encouraging guidance for the fourth quarter helped
Big 5 Sporting Goods Corporation
) achieve a Zacks #1 Rank (Strong Buy).
Since the release of its third-quarter results on Nov 1, 2012,
shares of this sporting goods retailer have increased about
40.9%. Moreover, considering its robust growth and the history of
beating quarterly earnings estimates (including an average beat
of 7.6% over the trailing four quarters), it can be stated that
this stock offers an attractive investment opportunity.
The Rank Driver
Strong same-store sales momentum, continued share gains, the
pricing power and margin improvement are the rank drivers for
On Nov 1, 2012, Big 5 Sporting, which competes with
Dicks Sporting Goods Corporation
), posted third-quarter earnings per share of 39 cents,
surpassing the Zacks Consensus Estimate by 21.9%.
Net sales of $251.8 million rose 7.3% from the year-ago
quarter and also beat the Zacks Consensus Estimate of $247
million. Sales mainly benefited from the calendar shift of the
4th July holiday into the third quarter, as well as the company's
ongoing merchandise and marketing initiatives.
Same-store sales increased 5.0% over the comparable year-ago
quarter, driven by improvement across all geographies and all the
major product categories of apparel, footwear and hard goods.
Gross profit increased 9% to $83.9 million, while gross profit
margin expanded 50 basis points to 33.3%. Selling and
administrative expenses grew 4.3% to $70.4 million driven by an
increase in store related expenses. Consequently, operating
income advanced 42.1% to $13.5 million, while operating margin
expanded 140 basis points to 5.4%.
Management expects earnings per share in the fourth quarter to
be in the range of 13-21 cents per share, with same store sales
in the mid-single digits. For fiscal 2012, the company plans to
open nearly 14 new stores, of which 3 will be relocations. At the
end of the year, the company's total store count is expected to
Earnings Estimate Revisions
Earnings estimate revisions of the company is exhibiting a
positive trend for fiscal 2012 and 2013. The Zacks Consensus
Estimate for fiscal 2012 climbed 16.7% to 70 cents per share in
the past 60 days, as all 5 estimates were revised upwards. This
represents a year-over-year surge of 52.2%. The Zacks Consensus
Estimate for fiscal 2013 grew 11.5% to 87 cents over the same
time frame as all 6 estimates were raised, reflecting a
year-over-year increase of 24.3%.
Big 5 Sporting currently trades at a forward P/E of 17.61x,
below its peer group average of 20.62x. On a price-to-book and
price-to-sales basis, the shares are trading at 1.67x and 0.29x,
respectively. This represents a 15.23% and 61.84% discount to the
peer group average of 1.97x and 0.76x, respectively. Based on the
company's fundamentals and projected long-term earnings growth of
11.3%, we expect the company's discount to narrow in the coming
About the Company
Based in El Segundo, California, Big 5 Sporting Goods Corp.
operates as a sporting goods retailer in the western U.S. The
company offers athletic shoes, apparel, accessories and a broad
selection of outdoor and athletic equipment for team sports,
fitness, camping, hunting, fishing, tennis, golf, snowboarding,
and in-line skating. Big 5 stores have nationally recognized
brands, such as Nike, Reebok, Adidas, New Balance, Coleman,
Rollerblade, Spalding and Wilson. The company also offers private
label merchandise manufactured exclusively for its stores.
Founded in 1955, the company currently operates 407 stores across
12 states in the U.S. The company has a current market cap of
BIG 5 SPORTING (BGFV): Free Stock Analysis
DICKS SPRTG GDS (DKS): Free Stock Analysis
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