Earnings Preview: Fred's - Analyst Blog

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Fred's Inc. ( FRED ) is all set to unveil its fourth-quarter and fiscal year 2011 financial results on March 21, 2012 before the opening bell. The current Zacks Consensus Estimate for the quarter is pegged at 24 cents a share and is 85 cents for the year. The Zacks Consensus Estimate also projects revenues for the quarter at $498 million and $1.88 billion for the fiscal 2011.

Third Quarter 2011 Recap

Fred's posted strong earnings of 24 cents in the third quarter, which climbed 20.0% year over year and surpassed the Zacks Consensus Estimate by 9.0%. Fred's total sales of $444.0 million increased 2% year over year. Fred, however, missed the Zacks Consensus Estimate of $446.0 million. The comparable store sales growth rate of 1.5% for the quarter remained flat with the prior year's increase.

(Read our full coverage on this earnings report: Core 5 Plan Boosts Fred's Earnings ).

Agreement of Estimate Revisions

Over the past seven days, most analysts covering Fred's have left their earnings estimates unchanged for the current quarter and the annual year of 2011 and 2012. However, over the past 30 days, only one out of the nine analysts has revised his earnings in the upward direction, while another one has made a downward revision for fiscal year 2012. The current quarter and the fiscal year 2011 did not see any revisions over the past 30 days.

Magnitude of Estimate Revisions

Given the lack of earnings estimate revisions, earnings estimates for the fourth quarter and full year 2011 have remained unchanged over the last 7 and 30 days. The current Zacks Consensus Estimates for the to-be-reported quarter and fiscal 2011 are 24 cents and 85 cents per share, respectively. The estimates are in line with  management's guidance range of 23 cents to 27 cents per share for the fourth quarter and 84 cents to 88 cents per share for the fiscal year 2011.

For the fiscal year 2012, the earnings estimates are maintained at 98 cents per share over the past 7 and 30 days.

The mixed trend in estimates point to the fact that there were no major catalysts during the fiscal years of 2011 and 2012 that could drive results.

Earnings Surprise History

With respect to earnings surprises, Fred's has topped the Zacks Consensus Estimate in three of the preceding four quarters. Over the last four quarters, the earnings surprise ranged from a 0.00% to 9.09%, with the average earnings surprise being 2.24%.

Recommendation

Fred anticipates improvements from its Core 5 Program, its strategic initiatives and cost reduction programs to help maintain profitability. However, the company remains concerned about the tough retail conditions.

Currently Fred's, which faces stiff competition from Dollar General Corporation ( DG ), Walgreen Co. ( WAG ) and Wal-Mart Stores Inc. ( WMT ), currently holds a Zacks #3 Rank (short-term Hold rating). On a long-term basis, we maintain a Neutral rating on the stock.


 
DOLLAR GENERAL ( DG ): Free Stock Analysis Report
 
FREDS INC ( FRED ): Free Stock Analysis Report
 
WALGREEN CO ( WAG ): Free Stock Analysis Report
 
WAL-MART STORES ( WMT ): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: DG , FRED , WAG , WMT

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