Here's What May Be Tempering Reactions To Five Below's Fantastic Q2

Five Below IncFIVEearnings report Wednesday, which helped boost the stock higher by more than 3 percent. But by Thursday morning, shares of Five Below gave up all of its gains and was lower by more than 2 percent.

Five Below's sell-off could in part be attributed to an "underwhelming" guidance update, Deutsche Bank's Paul Trussell commented in a research report. The company's outlook implies that its fourth-quarter performance will fall short of what the Street was looking for in terms of earnings per share and comparable sales growth.

Specifically, the retailer raised its full-year guidance by just 2.5 cents at the midpoint and implies its fourth-quarter EPS will fall short of the Street's current $1.11 per share estimate.

On top of that, during Five Below's post-earnings conference call, management highlighted its impact to Hurricane Harvey, Trussell added (see his track record here). The company appears to have "limited knowledge" of the ground situation and was unable to fully assess the extent of damage to its 23 stores that were closed ahead of the hurricane. So far, just four stores have reopened.

Overall, there isn't much to criticize in the second-quarter print itself, including a strong 9.3-percent comp growth, which was ahead of the analyst's 7-percent estimate. Also, the company's reported earnings per share was ahead of the Street's estimate and demonstrates the company's ability to "execute and manage trends."

Trussell maintains a Hold rating on Five Below's stock with a price target raised from $53 to $54.

At time of publication, shares of Five Below were down 3.37 percent at $47.61.

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