Shares of Big 5 Sporting Goods (NASDAQ: BGFV) soared today as a number of industry analysts upgraded the stock. In many cases, the stock was moved to a strong buy following yesterday’s after-market announcement of its third-quarter numbers. While the NASDAQ, in a storm-shortened week, was unable to finish strong today and ended the week down, Big 5 came out swaggering and swinging for the fences as it saw a gain of nearly 35%.
Yesterday, Big 5 outperformed the consensus numbers as it posted earnings per share of 38 cents, surpassing the Zacks Consensus Estimate of 32 cents. Additionally, net sales of $251.8 million rose 7.3% from the prior-year quarter sales of $234.7 million and surpassed the Zacks Consensus Estimate of $247 million. Admittedly, Big 5’s Q3 numbers were benefited by the calendar shift that placed Fourth of July sales in the third quarter, but this was not the whole story. Big 5 successfully unveiled a number of marketing initiatives and merchandising campaigns that were equally responsible for this gain as seen in the 5% increase in same-store sales for the same quarter last year.
These numbers do not mean that Big 5 is guaranteed to keep up these numbers. Given the competition, such as Dick’s Sporting Goods (NYSE: DKS), Wal-Mart Stores (NYSE: WMT) and Hibbett Sports (NASDAQ: HIBB) to name a few, Big 5 appears to simply be regaining sales in an industry on the upswing following the past years of recession. Investors, however, will certainly be happy with the fact that in addition to beating Street forecasts, Big 5 showed strong increases in gross profits and profit margins.
Following Thursday’s trading where Big 5 barely moved, closing the day at $8.92, its stock flew out of the gate today with heavy trading throughout the day. Bi5 5 opened at $10.13, a gain from Thursday’s close of $1.21. From there, things only got better as nearly two million shares were traded. This represents an increase of nearly 21 times its 90-day volume average. By 11 AM, the stock had climbed to $12.25 before being pegged back to $11.90 in the half hour that followed. Just like one of the hundreds of balls Big 5 sells, the stock bounced up to its high point for the day (and the last 10 months) when it reached $12.65 just before 2 PM. While this number proved unsustainable, investors were more than happy with their day when the bell rang and Big 5 had gained 34.8% or $3.10 to close at $12.02.
Following yesterday’s numbers and early trading today, a number of firms have had to rethink Big 5.
“…We have raised our 2012 EPS estimates from $0.65 to $0.72, raised 2013 from $0.90 to $1.00, and raised 2014 from $1.15 to $1.30. We have raised our price target from $13 to $15, and our rating from Buy to Strong Buy,” said one analyst at Needham & Company.
They weren’t alone. Stifel Nicolaus analyst David Schick said that the results indicate that Big 5 may be on the verge of an epic turnaround unseen since the spring of 2011. Schick said the initiatives are in the early stages, yet feels comfortable with his company’s upgrade of Big 5.
