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Big 5 (BGFV) Gains on Solid Q4 Sales & Raised Earnings View

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Sporting goods retailer, Big 5 Sporting Goods Inc.BGFV continues its solid run driven by the recently reported encouraging top-line numbers for the fourth quarter of fiscal 2016. Further, the company raised its earnings guidance for the quarter. Additionally, its strong earnings trends, robust outlook, store penetration strategies, impressive growth plans and financial strength bode well for the stock. These factors have aided it to gain the Zacks Rank #1 (Strong Buy) and carry a VGM Style Score of "A".

Moreover, the company's shares have surged 44.8% in the past one year, outperforming the Zacks categorized Retail-Miscellaneous/Diversified industry that has recorded growth of nearly 15% in the same period.

What's Aiding the Stock Performance?

Last week, Big 5 Sporting came up with fourth-quarter and fiscal 2016 sales numbers. Net sales for the fiscal fourth quarter declined 3.2% to $266.3 million from $275 million in the year-ago quarter and were below the Zacks Consensus Estimate of $273.6 million. However, comparable-store sales (comps) rose 3.1% from the prior-year quarter.

Big 5 reported net sales of $1.02 billion for fiscal 2016, falling a penny short of both the prior-year figure and the Zacks Consensus Estimate of $1.03 billion. Comps for the fiscal increased 1.7%.

Though top-line results for both periods lagged estimates and dipped year over year, the company remains optimistic about the results as the lag can primarily be attributable to the inclusion of an extra week in the sales numbers for the respective periods in fiscal 2015. However, for comparison purpose, the comparable-store sales (comps) numbers for the respective fiscal 2015 periods used the comparable 13-week and 52-week periods.

Comps for the fiscal fourth quarter gained mainly from the rise in both customer transactions and average sales owing to the company's actions to capitalize on the opportunities presented by the rationalization in the retail sporting goods industry. The primary reason behind the competitive rationalization in the markets where it operates is the recent liquidation of rivals Sports Authority and Sport Chalet.

Encouraged by top-line performance, the company raised the lower end of its earnings guidance for the fourth quarter and provided its estimates for fiscal 2016.

This has led to an uptrend in the Zacks Consensus Estimate in the last seven days. The Zacks Consensus Estimate for the fourth quarter and fiscal 2016 rose by 4 cents each to 34 cents and 84 cents per share, respectively.

Additionally, the company's unique strategy of offering exclusive branded merchandise sourced from leading manufacturers provides it an edge over its rivals in a fiercely competitive specialty retailing industry. Further, its merchandising plans, eCommerce growth and solid store network help it capture market share and fuel growth.

Further, Big 5 Sporting's strong financials provide it with the flexibility to boost shareholder value, as evident from its recent dividend hike. This marked the company's second-quarterly dividend hike announcement in 2016. In its third-quarter earnings release, the company raised quarterly cash dividend by 20%, which represented a 50% increase in dividend since the start of 2016. The raised dividend rate now stands at 15 cents compared with the previous rate of 12.5 cents.

Other Stocks to Consider

Some other favorably placed stocks in the same industry include Cabela's Inc. CAB , Tractor Supply Co. TSCO and ULTA Salon, Cosmetics & Fragrance Inc. ULTA , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Cabela's, with a long-term earnings growth rate of 12.5%, has surged nearly 38.3% in the past one year.

Tractor Supply, with a long-term earnings growth rate of 16.3%, has recorded an average beat of 2.6% in the trailing four quarters.

ULTA Salon has jumped 48.1% in the past one year. The stock has a long-term earnings growth rate of 19.5%.

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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 Nasdaq, Inc.


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

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