Analysts Weigh In On Ollie's Bargain Outlet's Q3 Report

Extreme value retailer of brand name goods company Ollie's Bargain Outlet Holdings Inc OLLI reported third-quarter results that came in better than expected.

Ollie's reported quarterly earnings of 41 cents per share, which beat the analyst consensus estimate of 38 cents. This is a 28.12% increase over earnings from the same period last year. The company reported quarterly sales of $327.049 million, which beat the analyst consensus estimate of $322.53 million.

Here is a summary of how some of the Street's top analysts reacted to the print.

The Analysts

Wells Fargo analyst Edward Kelly maintains an Equal-Weight rating on Ollie's with a price target lifted from $60 to $65.

Morgan Stanley analyst Simeon Gutman maintains at Equal-Weight, $70 price target.

Credit Suisse analyst Judah Frommer maintains at Outperform, $78 price target.

Wells Fargo: Relief Quarter

Overall, Kelly said the earnings report should provide some relief to investors after a disappointing second quarter report and the tragic and unexpected passing of CEO Mark Butler. Management also addressed the second quarter and said all missteps have been corrected and earnings growth can resume to its usual 20% profile next year.

Tuesday's earnings report and outlook can only be viewed as an "incremental positive" for the company but not necessarily for the stock which "still has issues," the analyst wrote. Ongoing concerns include uncertainty related to comp trends, cannibalization, SG&A spending, and difficulties in scaling the business model. As such, a return to 20% earnings growth next year could "prove to be difficult."

Related Link: Analysts Defend Ollie's Bargain After Disappointing Earnings, Guidance Cut

Morgan Stanley: Stabilizing Quarter

Ollie's quarter was better than feared and shows operational issues are being addressed, Gutman wrote in a note. The three main issues that plagued recent performance are either largely addressed or stabilizing, including inventory distribution problems as 2019 new store openings dominated the first quarter and higher store cannibalization, especially from acquired Toys "R" Us locations

The overall "stabilizing" third quarter suggests prior missteps are not part of any broader problem.

Ollie's stock is trading at around 17 times 2020 EV/EBITDA and a multiple north of 20 times is "too expensive" relative to the growth profile, the analyst wrote. As such, a mid-to-high-teens multiple is "fair" and inline with some of its peers.

Credit Suisse: 'Admirable Print'

Ollie's reported an "admirable print" at a difficult time and the tragic death of Butler could continue weighing on investor sentiment, Frommer wrote in a note. However, John Swygert is a "natural" successor to Butler and he should be able to command investor support as the P&L profile improves next year.

Prior concerning problems are "now largely behind" and a multiple of 30 times next 12 months earnings ($78 price target) is "achievable" over the next year given high-teens EPS growth and a return to positive comps, the analyst wrote.

Price Action

Shares of Oillie's Bargain Outlet were trading higher by 16% at $69.96 at time of publication.