Hibbett Sports: Earnings Preview

| About: Hibbett Sports, (HIBB)

Hibbett Sports Inc. (NASDAQ:HIBB) is scheduled to report its fourth-quarter 2012 financial results before the opening bell on March 9, 2012. The current Zacks Consensus Estimate for the quarter is earnings of 57 cents a share. For the quarter under review, revenue is expected to be $193 million, according to the Zacks Consensus Estimate.

Third-quarter 2012, a Synopsis

The robust performance of footwear and apparel sales along with operational efficiencies facilitated Hibbett Sports to deliver better-than-expected results for the third quarter ended October 29, 2011.

Hibbett’s third-quarter earnings of 59 cents per share outshined the Zacks Consensus Estimate of 51 cents and jumped 34.1% from the prior-year quarter earnings of 44 cents.

The company remains focused on mid-sized and smaller markets as well as strategic mix of branded and localized merchandise. It is geared toward increasing operating results while creating shareholders’ value.

Guidance for Fiscal 2012

Buoyed by better-than-expected results, management raised its fiscal 2012 earnings forecast. The company now expects earnings in the range of $2.05 to $2.11, up from its earlier forecast of $1.90 to $2.00 per share. Further, management stated that it expects a mid single-digit increase in comparable store sales in the current fiscal.

Zacks Consensus

Analysts covered by Zacks expect Hibbett Sports to post fourth-quarter 2012 earnings of 57 cents a share, higher than 44 cents delivered in the prior-year quarter. Currently, the Zacks Consensus Estimate ranges between earnings of 53 cents and 62 cents a share.

For fiscal 2012, the Zacks Consensus Estimate stood at $2.13 per share, higher than its previous fiscal earnings of $1.60. The current Zacks estimate ranges between $2.08 and $2.16 per share.

Agreement of Estimate

For the fourth quarter and fiscal 2012, of the 15 analysts covering the stock, 4 analysts revised their estimates upward, while none revised in the opposite direction, in the last 30 days. In the past week, 1 analyst upwardly revised for fourth quarter and fiscal 2012, while no movement in estimates the opposite direction.

Magnitude of Estimate Revisions

With positive affect from earnings revisions by analysts in the last 7 days, the Zacks Consensus Estimates for fourth-quarter and fiscal 2012 has increased by 1 cent each to 57 cents and $2.13 per share, respectively.

Surprise History

With respect to earnings surprises, Hibbett Sports has topped the Zacks Consensus Estimate over the last four quarters in the range of 2.3% to 15.7%. The average remained at positive 10.1%. This suggests that Hibbett has surpassed the Zacks Consensus Estimate by an average of 10.1% in the trailing four quarters.

Our View

Hibbett Sports operates sporting goods stores in small to mid-sized markets in the Southeast, Mid-Atlantic, and lower Midwest regions of the U.S. The company is strongly focused toward small towns and counties with population of 25,000 to 75,000.

We believe that the company has created a niche market for itself by strategically aligning its merchandise to regional/local sporting and community interests, which in turn, has given it a competitive edge over larger rivals, such as Dick's Sporting Goods Inc. (NYSE:DKS) and Big 5 Sporting Goods Corporation (NASDAQ:BGFV).

Furthermore, we believe Hibbett’s continued focus on expanding its store count will boost its top line going forward. Moreover, Hibbett’s management has already identified 350 to 375 locations for future stores and recently ramped up its distribution center to support over 1,200 stores from 1,000 stores earlier.

In addition, the company has a healthy debt-free balance sheet coupled with full availability under its $80 million unsecured credit facilities. This offers Hibbett the financial flexibility to drive its top line in future.

In addition, the company offers an extensive selection of quality branded merchandise that emphasizes team sports designed to appeal to a wide range of customers within each individual market. This provides a significant upside potential to the company.

Currently, Hibbett holds a Zacks #2 Rank, implying a short-term Buy rating on the stock. The company retains a long-term Outperform recommendation on the stock.

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