On Feb 18, Zacks Investment Research upgraded Kirkland's Inc. ( KIRK ) to a Zacks Rank #1 (Strong Buy), after the company reported solid fourth quarter and 2014 sales on Feb 5, which led the company raised its earnings guidance for 2014, the results of which are expected in March 12.
Why the Upgrade?
Kirkland's reported fourth-quarter sales of $178.7 million, which increased 14.5% on the back of 8.2% hike in comps compared with a flat comp in the year-ago quarter. Fiscal 2014 sales of $507.6 million increased 10.2% on the back of 6.1% hike in comps compared with a flat comp in the year-ago quarter.
We note that the growing e-Commerce business of the company and its aggressive store opening program has helped Kirkland's to post better-than-expected top-line results over the past few quarters. The company is focusing on upgrading its information system to maintain growth and momentum in its e-Commerce business.
The company plans to redesign and leverage the rollout of the new information system to improve online purchase and planning execution. We believe that growing homebuilding sector backed by lower interest rates has been building expectations of strong sales in the coming quarters.
The company has increased its view for the fourth quarter and fiscal 2014 earnings. It now expects fourth-quarter earnings to be within 84 cents to 87 cents as against 77 to 84 cents. Fiscal 2014 earnings are likely to range within 97 cents to $1.00 compared with 90 to 97 cents.
Almost all the estimates for the fourth quarter and fiscal 2014 have been revised upward over the last 30 days. The Zacks Consensus Estimate for fourth-quarter earnings stands at 87 cents, while the same for fiscal 2014 is pegged at 99 cents.
Other Stocks to Consider
Other stocks worth a look in the home furnishing sector include Haverty Furniture Companies Inc. ( HVT ), Restoration Hardware Holdings, Inc. ( RH ) and Williams-Sonoma Inc. ( WSM ). All these stocks carry Zacks Rank #2 (Buy).
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