The U.S.-based sporting goods retailer,
Big 5 Sporting Goods Corp.
), remains on our Neutral list with a target price of $19.00.
Big 5 Sporting Goods operates as sporting goods retailer in
the western U.S. The company's unique strategy of offering
exclusive branded merchandise sourced from leading manufacturers
impart it a competitive edge over other specialty retailer.
In addition, the company has implemented significant changes
in its store operations to make it more customer-friendly. We
expect these initiatives to induce more traffic to its stores and
boost the top line.
Furthermore, Big 5 Sporting follows a disciplined capital
allocation strategy, which focuses on making investments to
develop its business, while using the excess cash to enhance
shareholder returns through dividend payouts and share
Further, we remain impressed with Big 5 Sporting's consistent
focus on improvising merchandise margins and effective cost
management, which have enabled it to post better-than-expected
bottom-line results for the sixth straight quarter.
In late October, Big 5 Sporting posted strong bottom-line
results for third-quarter 2013, with adjusted earnings rising
15.4% to 45 cents per share from the year-ago and beating the
Zacks Consensus Estimate by a penny. The robust results were
aided by sales growth and improved margins. Moreover, the
reported earnings met the higher end of Big 5 Sporting's own
guidance range of 40-45 cents per share.
With a positive surprise of 2.3% in the third quarter, Big 5
Sporting has beaten the Zacks Consensus Estimate for the trailing
six quarters by an average of 24.2%. We expect Big 5 Sporting to
continue its earnings streak in the coming years, aided by its
However, we remain slightly cautious about the company's
performance due to a sluggish economic recovery that is impacting
discretionary spending. Moreover, the entry of
DICK's Sporting Goods Inc.
) into smaller and mid-sized markets, and Sports Chalet and
Sports Authority's venture into the small store format may mar
the company's performance. Additionally, our Neutral stance is
justified by tougher comparisons in the quarters ahead, given the
heightened gun demand last year.
Other Stocks to Consider
Currently, Big 5 Sporting has a Zacks Rank #3 (Hold). Some
better-ranked stocks in the retail industry include
Barnes & Noble, Inc.
). Both the stocks carries Zacks Rank #2 (Buy).
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