Has Investors Over-Reacted To Big Lots, Inc. (NYSE:BIG)’s Wider Than Estimated Loss?

It may sound logic that investors’ were correct in unloading the shares of Big Lots, Inc. (NYSE:BIG) after the company delivered a wider than estimated loss in the third quarter. However, there were also some favorable points to ponder over before resorting to hammering the stock.

Learn what the indicators are telling the analyst about BIG.

4Q Guidance Boosted

While the loss for the third quarter might have missed the Street analysts’ expectations, Big Lots has lifted its earnings forecast from continuing operations to $1.70 - $1.80 a share for the fourth quarter from $1.70 - $1.76 a share projected earlier. The mid-range of the latest earnings outlook was $1.75 a share compared to $1.73 a share. It expects comparable store sales to grow in the low-single digit during the fourth quarter.

Similarly, Big Lots has not changed its fiscal 2014 earnings forecast. It continues to expect income from continuing operations between $2.40 and $2.50 a share. The company also re-affirmed its comparable store sales uptick of 1 - 2% for the same period. It also confirmed cash flow from continuing operations guidance of $250 million for the fiscal year 2014.

Investors’ Remain Cautious

During the conference call, Big Lots CEO, David Campisi, exuded confidence and said that the company’s business was becoming more consistent and reliable. He pointed out that sales of food and furniture recorded double-digit growth apart from some encouraging areas.

However, the big worry for investors’ seemed to have been the downtick of sales on Thanksgiving Day and Black Friday on a year-over-year basis. This has perhaps raised a question of believing the management on the promised deliverables. Therefore, investors’ seemed to have virtually ignored the management’s lifting of fourth quarter earnings forecast.

Downgrading Of Stock

Four days before the announcement of the financial results by Big Logs, JPMorgan Chase & Co. (NYSE:JPM) has downgraded the company’s stock to Neutral from Overweight rating. The brokerage also reduced its price target to $51 from $53. JPMorgan attributed the downgrading to pushing back the top-line inflection to the second half of the next year as the favorable developments were in place now.

3Q Loss

For the third quarter, Big Lots suffered a net loss of $3.4 million or a loss of six cents a share on sales of $1.11 billion. Street analysts’ predicted the company to incur a loss of five cents a share on sales of $1.12 billion.



Big Lots, Inc. (NYSE:BIG) had nearly doubled in value from the February 2014 low of $25.50 to the November high of $51.75 but all the gain made in the last 6 months vanished in just 5 sessions last week. The price has just completely filled a big gap made in last June. If the support band of $40.00-$39.00 fails to bring any good demand, the weak will be technically damaged and more downside will be open even in the short term.

About the Author

Michael joined US Markets Daily in 2009 and is a national news reporter focusing on economic issues, data analysis and the financial health of state and local governments.

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