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Will Troubles at Big 5 (BGFV) Again Hurt Earnings in Q2?

Zacks Equity Research

Big 5 Sporting Goods Corp. (BGFV) is scheduled to report its second-quarter fiscal 2014 results after market closes on Jul 29. Last quarter, this sporting goods retailer posted a positive earnings surprise of approximately 11.11%. Let's see how things are shaping up for this announcement.

Factors Influencing the Upcoming Quarter

Big 5’s first quarter 2014 earnings announcement was followed by comments from the company’s management hinting at continued troubles ahead due to the weak sales trends in the second quarter given the lower-than-expected demand for firearms and ammunition products, a shift of the Easter holiday period into the second quarter this year and a soft consumer environment.

As a result, the company formulated a disappointing second-quarter guidance that projects a low negative to low positive single-digit comps along with earnings in the 12 cents to 20 cents range. This compares with comps growth of 4.4% and earnings of 28 cents per share in the second quarter of 2013.

With the weak demand for firearm and ammunition products continuing into the second quarter coupled with other factors mentioned above, we believe the troubles are not over for Big 5. Thus, we are not very optimistic about the company’s upcoming results.

Earnings Whispers?

Our proven model does not conclusively project Big 5 as likely to beat earnings this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 to surpass earnings estimates. However, this is not the case here due to the following factors:
Zacks ESP: ESP for Big 5 is 0.00% since the Most Accurate estimate stands at 17 cents per share, which is in line with the Zacks Consensus Estimate.

Zacks Rank #3 (Hold): Big 5’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident of an earnings surprise call. We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into earnings announcement, especially when the company is undergoing negative estimate revisions.

Stocks that Warrant a Look

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat:

Avis Budget Group Inc. (CAR) has an Earnings ESP of +3.18% and a Zacks Rank #1 (Strong Buy).

Archer Daniels Midland Co. (ADM) has an Earnings ESP of +5.26% and a Zacks Rank #2 (Buy).

Sotheby’s (BID) has an Earnings ESP of +3.47% and a Zacks Rank #2.

Read the Full Research Report on ADM
Read the Full Research Report on CAR
Read the Full Research Report on BGFV
Read the Full Research Report on BID

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