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Can Hibbett (HIBB) Q4 Earnings Beat Despite Cost Concerns?

Zacks

Hibbett Sports, Inc. HIBB is slated to release fourth-quarter fiscal 2019 results on Mar 22, before the market opens. The company’s earnings surprise history mirrored a dismal performance in the last three quarters. Consequently, it delivered average negative surprise of nearly 50% in the trailing four quarters.

The Zacks Consensus Estimate for earnings for the fiscal fourth quarter is pegged at 38 cents, which remained unchanged in the last 30 days. However, it reflects a decline of 13.6% from 44 cents earned in the prior-year quarter. Nonetheless, the Zacks Consensus Estimate for revenues is pegged at $299.3 million, reflecting an increase of 12.2% from the year-ago period.

Hibbett Sports, Inc. Price and EPS Surprise

Hibbett Sports, Inc. Price and EPS Surprise | Hibbett Sports, Inc. Quote


Let’s see how things are shaping up prior to this earnings announcement.

Factors Likely to Influence 4Q19

Hibbett has been witnessing a dismal performance since the start of fiscal 2019, owing to higher SG&A expenses that weighed on operating margins. Further, softness in license, equipment and accessory businesses hurt quarterly results.

Hibbett witnessed strained margins in recent quarters. Notably, higher SG&A expenses took a toll on operating margin for the last nine quarters. This increase in SG&A expenses was attributed to high e-commerce-related operating expenses, non-recurring costs associated with the acquisition of City Gear and deleverage due to lower sales. Additionally, the company expects SG&A expenses in fiscal 2019 to increase 7-9% (excluding City Gear acquisition costs) and 8.8-11.2%, including acquisition costs. This may weigh on operating margins for the fourth quarter and fiscal 2019.

Backed by the dismal bottom-line trend, management trimmed its earnings guidance for fiscal 2019. Excluding non-recurring costs associated with the acquisition of City Gear, management now envisions adjusted earnings of $1.55-$1.65 per share, down from $1.57-$1.75 mentioned earlier.

However, the company has been witnessing robust comparable store sales (comps) performance. Despite the dismal third-quarter fiscal 2019 results, Hibbett’s comps gained from a significant improvement in the branded apparel business. Additionally, sportswear and footwear businesses also delivered positive comps.

Furthermore, the company raised its comps guidance for fiscal 2019. Comps are now anticipated to be flat to up 1% versus negative 1% to positive 1% mentioned previously.

Additionally, the company’s focus on initiatives — including enhancing omni-channel capabilities, renewing loyalty program and inventory management — bodes well. It expects continued growth in the e-commerce business as mobile app enhancements as well as the recently launched BOPIS and ROPIS capabilities are delivering results. All these factors should cushion the company in the upcoming results.

What the Zacks Model Unveils

Our proven model does not conclusively predict that Hibbett is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Stocks with a Zacks Rank #4 or 5 (Sell-rated) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Hibbett currently has a Zacks Rank #3 and an Earnings ESP of 0.00%. While the company’s favorable Zacks Rank increases the predictive power of Earnings ESP, an Earnings ESP of 0.00% makes surprise prediction difficult.

Stocks Poised to Beat Earnings Estimates

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

Darden Restaurants, Inc. DRI has an Earnings ESP of +1.07% and a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Ollie's Bargain Outlet Holdings, Inc. OLLI currently has an Earnings ESP of +1.34% and a Zacks Rank #2.

The Michaels Companies Inc. MIK presently has an Earnings ESP of +0.93% and a Zacks Rank #3.

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