How The Street Reacted To A Miss And Guidance Cut From Hibbett Sports

Hibbett Sports, Inc. HIBB reported lower-than-expected quarterly earnings and slashed its FY 2017 EPS guidance on slower-than-expected sales of higher margin seasonal products.

Hibbett reported third-quarter EPS of $0.66, well below consensus expectations for $0.74, on soft comp performance (+0.7 percent vs. cons +1.0 percent,) and weaker-than-expected margins. The company also lowered its FY17 EPS guidance to $2.82–$2.88 from $2.93–$3.02.

Analysts' Take

Eric Tracy of Brean Capital maintains his Sell rating on Hibbett shares, saying the risk/reward remains asymmetrically skewed to the downside, based on his belief that potential for EPS inflection in FY 2018 remains unlikely given structural headwinds. The analyst sees headwinds in the form of lower income consumer, B&M share erosion and incremental e-commerce investments.

“[W]e note that e-comm website isn't expected to go live until late 2H17 at the earliest, and even once live, growth here will likely be dilutive until scaled,” Tracy wrote in a note.

As such, Tracy cut his fourth quarter/FY 2017 estimates and is now modeling EPS of $0.69/$2.87 (from $0.71/$2.98), respectively, based on comp growth of 1.0 percent (unchanged vs. prior). The analyst also trimmed his below consensus FY 2018 EPS by $0.04 to $2.86. However, the analyst kept his target price unchanged at $33.

Meanwhile, Canaccord Genuity maintains its Hold rating and cut its price target to $39 from $40 despite encouraged by the progress in product and omnichannel. The brokerage, though, welcomed the inventory reductions, has questioned the company’s promotional strategy.

“While we appreciate the choice to manage inventory, we question the decision to pull the promotional trigger before the winter season gets into full swing or to carry too much seasonal inventory that early in the season,” analyst Camilo Lyon wrote in a note.

Further, B. Riley’s Mitch Kummetz reacted to Hibbett’s results by cutting FY 2017 EPS view to $2.86 from $3.02 versus consensus of $3.00. The analyst, who has a Neutral rating on the stock, also slashed the price target by $2 to $42.

At last check, shares of Hibbett fell 1.73 percent to $39.70.