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Here's How Big Lots (BIG) is Poised Ahead of Q3 Earnings

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Zacks Equity Research
·4 min read
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We expect Big Lots, Inc. BIG to report top- and bottom-line improvement in third-quarter fiscal 2020 results on Dec 4. Although the Zacks Consensus Estimate for the quarter under review is stable at 65 cents in the past 30 days, the same suggests significant growth from a loss of 18 cents in the year-earlier quarter. Moreover, the consensus mark for quarterly revenues is pinned at $1,351 million, up more than 15% from the year-ago quarter’s tally.

Encouragingly, this Ohio-based company has delivered an earnings surprise of 54.4% in the past four quarters, on average.

Key Factors to Consider

Big Lots is gaining from its transformation initiative, including Operation North Star that focuses on top-line growth, cost containment and technological enhancement. The company also remains focused on enhancing the omni experience including e-commerce expansion. Moreover, it has been expanding the payment options online with lease-online, pick-up-in-store, the online version of the Easy Leasing program by Progressive, and the Big Lots credit card.

On Sep 29, Big Lots provided a business update for third-quarter fiscal 2020. Management cited that it has been witnessing robust sales, which is likely to help deliver a sturdy quarterly performance. In addition, the company’s growth strategies, including Operation North Star and its strong assortment and early encouraging signs before Christmas, have been tailwinds. Management had projected comparable sales growth in mid-teens for fiscal third quarter. Based on impressive sales performance, it had guided third-quarter earnings per share in the bracket of 50-70 cents per share. Further, the outlook incorporates estimated share repurchase activity for the quarter.

On its second-quarter earnings call, management had projected less gross-margin rate benefit from seasonal and mix in fiscal third quarter. As a result, gross margin is expected to remain similar year over year. It had also anticipated continued pandemic-related incremental expenses in the second half of the fiscal, although lower than that experienced in the first and second quarters. Consequently, the overall SG&A growth is likely to be moderate in the third quarter compared to that in fiscal second quarter.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Big Lots this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Big Lots, Inc. Price and EPS Surprise

Big Lots, Inc. Price and EPS Surprise
Big Lots, Inc. Price and EPS Surprise

Big Lots, Inc. price-eps-surprise | Big Lots, Inc. Quote

Although Big Lots has a Zacks Rank #3, its Earnings ESP of 0.00% is making surprise prediction difficult.

Stocks With Favorable Combinations

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to beat on earnings in the upcoming releases.

Kroger KR currently has an Earnings ESP of +0.38% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Ollie’s Bargain Outlet OLLI currently has an Earnings ESP of +0.58% and a Zacks Rank #3.

Casey’s CASY currently has an Earnings ESP of +1.49% and a Zacks Rank #3.

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Big Lots, Inc. (BIG) : Free Stock Analysis Report
 
The Kroger Co. (KR) : Free Stock Analysis Report
 
Caseys General Stores, Inc. (CASY) : Free Stock Analysis Report
 
Ollies Bargain Outlet Holdings, Inc. (OLLI) : Free Stock Analysis Report
 
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Zacks Investment Research