Cabela's Surges as Activist Investor Discloses 11.1% Stake
Shares of Cabela's Incorporated CAB, which had nosedived following the company’s dismal third-quarter 2015 performance, suddenly took a U-turn yesterday, surging roughly 17.5% after activist hedge fund manager Elliott Associates unveiled an 11.1% stake in the hunting, fishing and camping supplies retailer. The activist investor believes that the stock is undervalued and may be a potential takeover target.
According to a SEC filing, Elliott stated “…in light of the robust environment for private equity investment in retail companies, potential strategic interest in the Issuer, and the Issuer's substantial asset holdings, there exist multiple pathways for the Issuer to unlock significant unrealized value.”
Elliott looks forward to holding talks with Cabela’s board of directors to find strategic opportunities that would be in the best interest of the company and the shareholders. These plans may involve selling the company, optimization of capital structure, asset monetization or other operational and management endeavors.
The sudden jump in Cabela’s share price may draw investors’ interest back to the stock that was down 20% before yesterday’s gain, since the announcement of the third-quarter results.
The company posted quarterly earnings of 71 cents a share that missed the Zacks Consensus Estimate by a couple of cents and fell 12.3% from the prior-year quarter. The lower-than-expected results were primarily due to weakness in the fall apparel and footwear business which overshadowed robust performances of the merchandise and Cabela’s CLUB businesses.
Moreover, Cabela’s bottom line fell short of the Zacks Consensus Estimate for the third time in the last four quarters. In the trailing four quarters, this Zacks Rank #5 (Strong Sell) stock has missed the estimate by an average of 6.1%.
Stocks to Consider
Some better-ranked stocks in the retail sector include ULTA Salon, Cosmetics & Fragrance, Inc. ULTA, Build-A-Bear Workshop Inc. BBW and Vera Bradley, Inc. VRA. All these stocks sport a Zacks Rank #1 (Strong Buy).
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CABELAS INC (CAB): Free Stock Analysis Report
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