Big Five Sporting Goods: Pre-Earnings, Showing Signs of Short Squeeze

Big Five Sporting Goods (BGFV) is set to release Q4-2021 earnings on March 1^st, post-market. The sporting goods retailer has beat expectations in three out of the last four reports. The company released guidance for its upcoming report and it may beat estimates. As with prior earnings reports from the company, its stock is undergoing short squeeze conditions. For the short-term, although market conditions are extremely volatile, I rate the company as bullish.

Business Operations

Big Five Sporting Goods operates 431 stores, each one averaging 11k sq feet. The company has operations in the following eleven western states: Arizona, California, Colorado, Idaho, Nevada, New Mexico, Oregon, Texas, Utah, Washington, and Wyoming. Big 5 Sporting Goods sells a large variety of athletic equipment and apparel. The company enjoys large margins on its sales.

Q4-2021 Earnings Estimate

Big Five Sporting Goods released earnings guidance last month. The company indicated strong margin performance and a record year of sales and earnings. Same store sales increased 0.2% year-over-year and 10.6% over two years.

The company expects a diluted EPS between $0.84 and $0.86 versus its previous forecast of $0.55 to $0.70. Estimated revenue is $273.4 million. Current market consensus EPS is $0.86 and revenue, $269.49 million. The company expects to beat the consensus.

Big Five Sporting Goods should report cash and cash equivalents of $97.4 million. The company typically operates at a net income and positive EBITDA. Its Q3-2021 performance showed the company’s operating income at $32.8 million and a net income of $24.1 million. The company will release its final Q4-2021 reports on Tuesday, March 1^st, post-market.

Short Squeeze Conditions

Big Five Sporting Goods stock price performance has a history of reacting well to quarterly reports. The short-lived rally typically lasts between earnings release and dividend payout. For the last four earnings calls, the company beat expectations three times and experienced a rally on three occasions.

• Q3-2021 missed expectations but stock rallied, price increased by more than $23 per share

• Q2-2021 beat expectations and stock rallied, price rose increased by than $15 per share over several days

• Q1-2021 beat expectations and stock rallied, price increased by more than $16 per share

• Q4-2020 beat expectations but stock fell, price decreased by around $4 per share

Financial websites report 20.012 to 21.89 million shares float, representing between 89.70% – 94.75% of outstanding shares being shorted. The metrics indicate the possibility of a short squeeze. A short squeeze does not necessarily mean that the stock will go up, but rather that investor sentiments expect it to go up. Current market volatility may cancel out the trend on this earnings release.

Wall Street’s Take

Turning to Wall Street, Big Five Sporting Goods has a Moderate Buy rating, based on 1 Buy rating in the last three months. The average Big Five Sporting Goods price target of $23.00 implies a 41.19% upside potential.

Conclusion

Big Five Sporting Goods will reports its Q4-2021 earnings Tuesday, March 1^st after market. The company has released earning guidance and it expects to beat the consensus. It also reports record sales and margins for PY2021.

The company’s stock price has experienced short rallies during and after earnings releases, and its stock is currently under a short-squeeze condition. Larger market volatility may easily erase any rally around the company’s report. For the short-term, I rate the company as bullish.

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