Back to top

Image: Bigstock

Check Big Lots' (BIG) Probability to Beat in Q2 Earnings

Read MoreHide Full Article

Big Lots’ Inc. (BIG - Free Report) is expected to report second-quarter fiscal 2018 results on Aug 24, after the market opens. The company outperformed the Zacks Consensus Estimate in the trailing four quarters by an average of 3.5%. In the last quarter, the company delivered a negative earnings surprise of 20.2%. Let’s see how things are shaping up prior to this announcement.

How are Estimates Faring?

The Zacks Consensus Estimate for the quarter under review stands at 67 cents, remaining flat on a year-over-year basis. The consensus estimate is in line with the company’s guided range of 60-70 cents per share. We note that the Zacks Consensus Estimate has remained stable in the last 30 days.

The Zacks Consensus Estimate for revenues of $1,233 million indicates a growth of roughly 1% from the year-ago quarter. We note that total revenues of this Ohio-based company decreased 2.1% in the last reported quarter.

Let’s delve deeper and find out the factors impacting the results.

Big Lots, Inc. Price and EPS Surprise

Factors to Consider

Big Lots is gaining from sturdy performance in the Soft Home category for the past few quarters. In the first quarter of fiscal 2018, Soft Home was up by mid-single digits. Moreover, to tap the opportunities presented by this category, management added more brands and also revamped the food department by giving it a fresh look for the convenience of customers.

Further, the company is pursuing several initiatives to expand its customer base. Among them, the e-commerce business and Store of the Future deserve a mention. Per management, the e-commerce business that was launched two years back is doing really well. The first quarter of fiscal 2018 was the best quarter so far for the e-commerce business, recording the highest level of sales and lowest operating loss. Also, in an effort to satisfy customers, the company unveiled Store of the Future in 2017. Management is confident to achieve the opening of 180 stores this year versus 30 stores opened in 2017.

However, Big Lots witnessed soft margins in the first quarter with a contraction of 10 basis points (bps) to 40.5%. The company’s gross profit decreased 2.3% year over year to $512 million on the back of lower revenues. Decline in revenues can be attributable to lower comparable sales (comps) and limited store openings year over year.

Adding to the woes, management had earlier lowered its fiscal 2018 guidance, wherein it projects adjusted earnings per share to be within $4.50-$4.70 compared with the earlier guidance of $4.75-$4.95. Comps are expected to increase 1%.  For the fiscal second quarter, earnings per share are forecasted to be 60-70 cents compared with 67 cents in the prior-year quarter. Comps are expected to be flat to up 2%.

What the Zacks Model Unveils

Our proven model shows that Big Lots is likely to beat estimates this quarter as the stock has the right combination of two key ingredients — a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Michael Kors has an Earnings ESP of +4.48% and a Zacks Rank #2. This makes us reasonably confident of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks With Favorable Combination

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

Foot Locker (FL - Free Report) has an Earnings ESP of +3.55% and a Zacks Rank #2.

Dollar Tree (DLTR - Free Report) has an Earnings ESP of +2.41% and a Zacks Rank #2.

Best Buy (BBY - Free Report) has an Earnings ESP of +1.46% and a Zacks Rank #2.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>

Published in