Will Big Lots (BIG) Disappoint This Earnings Season? - Analyst Blog

By Zacks Equity Research,

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Big Lots Inc. ( BIG ), broad-line closeout retailer, is set to report its first-quarter fiscal 2014 results on May 30, 2014. Last quarter, it posted breakeven earnings. Let us see how things are developing for this announcement.

Factors Influencing the Quarter

A difficult retail environment along with inclement weather (February and March) remains a drag on the retail sector. Big Lots might not prove to be an exception. Moreover, the company has been facing lower discretionary sales, falling comps and margin compression for some time now.

To battle these, the company has initiated a turnaround which includes pullback from Canada and more focus on profitable avenues like furniture financing and the food consumables category. Though these steps are in the right direction, we stay on the sidelines as they might turn out to be time consuming.

Earnings Whispers

Our proven model does not conclusively project Big Lots as likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. This is not the case here as you will see below.

Negative Zacks ESP:  ESP for Big Lots is -2.27%. This is because the Most Accurate estimate is pegged at 43 cents while the Zacks Consensus Estimate stands at 44 cents.

Zacks Rank: Big Lots Zacks Rank #3 (Hold) increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise. We caution against stocks with a Zacks Rank #4 and #5 (Sell-rated stocks) going into an earnings announcement, especially when the company is witnessing negative estimate revisions.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows these to have the right combination of elements to post an earnings beat:  

OmniVision Technologies, Inc. ( OVTI ) with an Earnings ESP of +50.00% holds a Zacks Rank #1.

United Natural Foods, Inc. ( UNFI ) with an Earnings ESP of +2.70% holds a Zacks Rank #3.

Lions Gate Entertainment Corp. ( LGF ) has an Earnings ESP of +2.56% and a Zacks Rank #3.

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BIG LOTS INC (BIG): Free Stock Analysis Report

LIONS GATE ETMT (LGF): Free Stock Analysis Report

OMNIVISION TECH (OVTI): Free Stock Analysis Report

UTD NATURAL FDS (UNFI): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Stocks: BIG , LGF , OVTI , UNFI

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