Shares of Big Lots, Inc. BIG hit a new 52-week high of $63.28 on Jan 26, though it closed a tad lower at $63.27. Notably, the company has been gaining from its strategic endeavors apparent from its eighth straight earnings beat in third-quarter fiscal 2017.
Impressively, this Zacks Rank #3 (Hold) stock has also surged 30.3% in a year, outperforming the Retail-Discount industry’s growth of 24.9%. The industry ranks amongst the top 21% (53 of 256) of all Zacks industries.
What’s Pushing Big Lots’ Shares Higher?
Big Lots’ furniture financing programs and soft home category have been consistently gaining traction. In fact, furniture has been the leading performer in the last few quarters and is likely to continue the trend in fiscal 2017 as well. Moreover, management has been expanding assortments in this category by including lawn and garden items such as patio furniture, gazebos and gas grills.
Furthermore, to tap the opportunities in the furniture and soft home categories, management added more brands and revamped the food department by giving it a fresh look for the convenience of customers. Also, the company rolled out its cooler/freezer facility in stores in an attempt to expand its merchandise of food-related items to target food stamp recipients. Meanwhile, its merchandising strategies and effective marketing seem to be paying off quite well.
Driven by these robust initiatives, Big Lots has shown impressive comparable-store sales (comps) growth. Evidently, comps have increased in 13 of the trailing 15 quarters. For the fourth quarter of fiscal 2017, comps are expected to be up in the range of flat to up 2%. Additionally, management projects fiscal 2017 adjusted earnings in the band of $4.23-$4.28 per share, representing growth of 16-18% from $3.64 recorded in fiscal 2016. It envisions fourth-quarter earnings in the range of $2.35-$2.40 per share.
Encouragingly, analysts are steadily growing bullish on the stock that is evident from the rise in earnings estimates. The Zacks Consensus Estimate of $4.29 for fiscal 2017 and $4.94 for fiscal 2018 have moved north 2 cents and 8 cents, respectively, in the last seven days. Also, the estimate of $2.41 for the fourth quarter of fiscal 2017 inched up by a penny in the said time period.
Valuation Perspective
Big Lots looks appeasing from valuation metrics as well evident from its Value Score of B. The company with a price-to-sales ratio of 0.5 versus the industry’s 0.9 indicates that the stock has enough upside potential. Also, it looks attractive with respect to a forward price-to-earnings (P/E) ratio of 15.3 versus industry’s 26.5. Further, its EV/EBITDA ratio of 7.6 is lower than 11 for the industry.
Bottom Line
Though these attributes raise optimism in the stock, the company’s gross margin looks somewhat pressurized and is likely to decline year over year in the fiscal fourth quarter. Moreover, sluggishness in electronics, toys and accessories remains a headwind.
However, we expect the company’s robust strategies to offset these hurdles, and help it continue with its growth story.
Apart from Big Lots, companies like Burlington Stores, Inc. BURL, The Estee Lauder Companies Inc. EL and Nu Skin Enterprises, Inc. NUS scaled 52-week highs on Jan 26. All these three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of Burlington Stores hit a 52-week high of $128.33, though it closed a tad lower at $127.61.
Shares of Estee Lauder scaled a 52-week high of $137.85, closing marginally lower at $137.71.
Shares of Nu Skin Enterprises hit a 52-week high of $73.64, though it closed a tad lower at $73.43.
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