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Factors Influencing Big Lots' (BIG) Fate in Q1 Earnings

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Big Lots, Inc. (BIG - Free Report) is slated to report first-quarter fiscal 2019 results on May 31. This Ohio-based company has witnessed negative earnings surprise in three of the trailing four quarters.

Let’s see what awaits the company this time around.

Which Way Are Estimates Heading?

The Zacks Consensus Estimate for the quarter under review is pegged at 70 cents, indicating a decline of 26% from earnings reported in the year-ago quarter. We note that the Zacks Consensus Estimate has been stable over the past 30 days.

The Zacks Consensus Estimate for revenues is $1,294 million, up 2% from $1,268 million recorded in the year-ago quarter. We note that total revenues of this company increased 2.6% year over year in the last reported quarter.

Factors to Consider

Big Lots is gaining from sturdy performance in Furniture, Seasonal and Soft Home categories for a while now. This momentum is expected to continue, which may have a positive impact on the top line in the fiscal first quarter.

The company is on track with its Store of the Future initiative, which includes store remodeling efforts. This will help it expand customer base and drive store traffic. Also, Big Lots has recently undertaken a three-year cost reduction plan. The areas where the company will focus on reducing expenses are organization size and structure, store payroll, indirect costs, supply chain and cost of goods sold. Such well-chalked plans are likely to aid the company’s first-quarter results.

However, Big Lots has been reeling under dismal margins for the past few quarters, mainly due to higher costs. Further, it expects to witness higher distribution, transport and product costs for the first quarter of fiscal 2019. Although the company is on track with cost-saving efforts, the abovementioned headwinds pose threats for the company’s bottom line in the to-be reported quarter. In fact, Big Lots expects adjusted earnings in the fiscal first quarter to be 65-75 cents per share compared with 95 cents reported in the year-ago period.

What the Zacks Model Unveils

Our proven model doesn’t show that Big Lots is likely to beat estimates this quarter as the stock doesn’t have the right combination of two key ingredients — a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Big Lots has a Zacks Rank #3 but an Earnings ESP of -5.71%, which makes surprise prediction difficult.

Stocks With Favorable Combination

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.

G-III Apparel (GIII - Free Report) has an Earnings ESP of +4.55% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dollar General Corporation (DG - Free Report) has an Earnings ESP of +2.13% and a Zacks Rank of 2.

Costco Wholesale Corporation (COST - Free Report) has an Earnings ESP of +2.10% and a Zacks Rank of 3.

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