Is Big 5 Sporting (BGFV) Likely To Beat Earnings In Q3?

We expect sporting goods retailer, Big 5 Sporting Goods Corp. (NASDAQ:BGFV) to beat expectations when it reports third-quarter 2016 results after the market closes on Nov 1.

Last quarter, the company reported a substantial earnings beat, with a surprise of 266.7%. However, the bottom line has underperformed the Zacks Consensus Estimate by an average of 6.1% over the trailing four quarters. Let’s see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Big 5 Sporting may beat earnings because it has the right combination of the two key components.

Zacks ESP: Big 5 Sporting currently has an Earnings ESP of +3.33%. This is because the Most Accurate estimate stands at 31 cents, while the Zacks Consensus Estimate is pegged lower at 30 cents. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: Big 5 Sporting carries a Zacks Rank #1 (Strong Buy). Note that stocks with a Zacks Rank #1, 2 or 3 have a significantly higher chance of beating earnings. Conversely, Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement.

The combination of Big 5 Sporting’s Zacks Rank #1 and positive ESP make us reasonably confident of a positive earnings beat.

What's Driving the Better-than-Expected Earnings?

Big 5 Sporting’s splendid second-quarter performance gained from robust sales, flat merchandise margins and tight inventory and expense control, despite a highly competitive and promotional retail environment. Further, the company revealed that it commenced the third quarter on a strong note, evident from quarter-to-date comparable sales (comps) growth in the high mid-single-digit range.

Comps at the start of the third quarter mainly gained from the closing of several rival stores in its markets, which led customers to acknowledge the ease of shopping at Big 5 Sporting given its wide range of product assortments and value. Further, the company remains keen on making the most of the opportunities available due to this industry consolidation by focusing on its merchandise mix and stepping up promotional activities.

Consequently, management provided robust comps, sales and earnings outlook for the third quarter. All these factors keep us optimistic about the company’s performance in the to-be-reported quarter.

Other Stocks that Warrant a Look

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

Avon Products Inc. (NYSE:AVP) , scheduled to report earnings on Nov 3, currently has an Earnings ESP of +33.33% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Hibbett Sports Inc. (NASDAQ:HIBB) , expected to report earnings on Nov 18, currently has an Earnings ESP of +4.00% and a Zacks Rank #2 (Buy).

Burlington Stores Inc. (NYSE:BURL) , expected to report earnings on Nov 22, currently has an Earnings ESP of +3.03% and a Zacks Rank #2.

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