The firm said it lowered its rating on the closeout retailer as positive developments are now in place, with top line inflection likely pushed to the second half of 2015.
"With access to credit initiatives now in place (furniture financing [and] EBT acceptance), CEO Campisi (and team) has successfully built a better mousetrap moving from negative to positive same store sales in the first half of 2014, while maintaining gross margin stability," the firm said.STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.
JPMorgan reduced its price target on Big Lots to $51 from $53.
Separately, TheStreet Ratings team rates BIG LOTS INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate BIG LOTS INC (BIG) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and feeble growth in the company's earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- BIG's revenue growth has slightly outpaced the industry average of 4.0%. Since the same quarter one year prior, revenues slightly increased by 1.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Multiline Retail industry average. The net income increased by 10.0% when compared to the same quarter one year prior, going from $18.13 million to $19.94 million.
- BIG's debt-to-equity ratio is very low at 0.07 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.11 is very weak and demonstrates a lack of ability to pay short-term obligations.
- BIG LOTS INC's earnings per share declined by 18.4% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, BIG LOTS INC reported lower earnings of $2.14 versus $2.98 in the prior year. This year, the market expects an improvement in earnings ($2.50 versus $2.14).
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Multiline Retail industry and the overall market, BIG LOTS INC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: BIG Ratings Report