We have upgraded our long-term recommendation on
Big 5 Sporting Goods Corporation
) to Outperform, based on the company's back-to-back quarters of
positive earnings surprises along with an encouraging guidance
for the fourth quarter of fiscal 2012.
Positive Earnings Surprise & Upbeat Guidance
Big 5 Sporting has surpassed the Zacks Consensus Estimate in 3 of
the trailing 4 quarters, with an average earnings surprise of
7.6%. The company has consecutively beaten the Zacks Consensus
Estimate in the fiscal third and second quarter, posting earnings
surprise of 21.9% and 50.0%, respectively.
Driven by strong top-line performance along with effective cost
management, Big 5 Sporting's earnings of 38 cents per share
for third-quarter 2012 came 44.4% higher than the year-ago
quarter earnings and handily surpassed the Zacks Consensus
Estimate of 32 cents . The quarterly earnings include a store
closing charge of 1 cent a share.
Net sales of $251.8 million rose 7.3% from the prior-year quarter
sales of $234.7 million and surpassed the Zacks Consensus
Estimate of $247 million. Sales in the quarter mainly benefited
from the calendar shift of the 4th July holiday into the third
quarter as well as the company's ongoing merchandise and
The company now anticipates earnings per share in the range of 13
cents - 21 cents in fourth-quarter fiscal 2012 on the back of a
mid-single-digit growth expectation in comparable-store sales.
Earnings Estimates on the Rise
Following strong quarterly performance for the third quarter of
fiscal 2012, the Zacks Consensus Estimates has been showing an
upward trend. In the last 60 days, the Zacks Consensus Estimate
for both fiscal 2012 and 2013 were raised by 9 cents, to 70 cents
and 87 cents per share, respectively.
This leading sporting goods retailer in the western U.S. has a
unique strategy of offering exclusive branded merchandise sourced
from leading manufacturers that provide it with a competitive
edge over its rivals like
Dick's Sporting Goods Corporation
). The company also leverages its strong vendor relationships to
source overstock and closeout merchandise at substantial
discounts, achieving dual objectives of boosting gross margin
while offering compelling value to customers.
Further, we believe Big 5 Sporting continues to progress well
with its growth initiatives, which include expanding its store
base and bringing in technological advancements to better serve
its patrons. The company leverages an extensive network of stores
to effectively penetrate into its target markets, which in turn,
enables it to generate healthy sales and gain market share. The
company's fourth quarter store plans include opening of 8
locations thereby bringing the total store count to 414 by the
end of fiscal 2012.
The above mentioned positives have induced us to retain a Zacks #
1 Rank on the stock, implying a short-term Strong Buy rating,
which is in sync with our long-term recommendation.
BIG 5 SPORTING (BGFV): Free Stock Analysis
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