KeyBanc Increases Estimates On Big Lots

In a research note released Tuesday, KeyBanc analyst Bradley Thomas reiterated a Buy rating on Big Lots BIG and increased his price target from $50 to $53.

The analyst increased the price target primarily on the basis that the retailer has significant potential to grow its earnings per share and the fact that the company has initiatives set in place to continue to grow.

In addition, the analyst expects Big Lots to achieve earnings per share of $3.68 in full-year 2016 versus $1.75 in the full-year of 2013.

The increase in the EPS estimate is primarily due to share repurchase programs, getting rid of unprofitable ventures, the ability to accept snap programs and the rollout of financing available on furniture.

The analyst continued by stating, “We note that our $3.68 forecast for potential FY16 EPS does not include any benefit from the Co.'s 'Edit to Amplify' strategy.” This strategy is meant to reduce less relevant categories and emphasize growing categories; this strategy would increase EPS by nearly $0.18.

For the full-year of 2016, the analyst is expecting Big Lots to report $165 to $170 in sales per square foot and a six percent operating margin. In 2013 sales per square foot were $156.

Shares of Big Lots are up two percent Tuesday and are up 40 percent year-to-date.