Zacks Investment Research downgraded shares of Cabela's Inc. (CAB) from OUTPERFORM to NEUTRAL on October 30, 2012, with a target price of $47.00.
Cabela's third-quarter 2012 earnings of $0.60 per share came in line with the Zacks Consensus Estimate but rose 20% year-over-year buoyed by robust performance of next-generation stores, higher merchandise margins and strong growth at the Cabela's CLUB Visa program. Merchandise gross margin expanded 70 basis points to 37.4%. Management now anticipates 2012 earnings to be at the upper end of the prior guidance range of $2.63 to $2.68 per share. For 2013, the company expects earnings to increase at least at a low double-digit rate. Total revenue grew 9.2% to $741.2 million but fell short of the Zacks Consensus Estimate of $750 million. Moreover, the quarter's downside was the decline in the Direct business. Revenue for the segment came in at $196.8 million, down 6.7% year over year due to lower demand for softgoods and footwear, and absence of shipping income from CLUB customers. Direct operating margin also shriveled 220 basis points to 15.4%. Given the pros and cons embedded in the stock we prefer to be on the sidelines at this juncture.
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