Cost Plus Inc. - Momentum
March 27 2012 - 8:00PM
Zacks
CPWM 0312
Cost Plus (CPWM)
Cost Plus (aka
World Market) operates 258 stores nationwide that offer an eclectic
mix of everything from exotic (but economical) furnishings to
cookware and foods from around the world.
Last time CPWM hit
the Zacks Rank #1 buy list on January 24, 2011 it was a $12 dollar
stock; fast forward less than two months and the shares are
up 50%, now trading close to $18 after hitting a 5 year high of
$18.66.
In January my focus
was on World Market’s unique positioning, growth prospects and
expansion. I also saw analysts moving their estimates higher ahead
of the earnings report which can be one of the best indicators if a
stock is going to maintain momentum.
All of these
factors combined made CPWM a solid Zacks Rank Buy candidate.
The retailer delivered those anticipated bullish results on March
22nd, beating Zacks Consensus Estimates and sending shares
higher. The question now is whether this momentum can
continue?
Earnings Highlights
(From their press release)
- Same store sales for the quarter increased 7.6% on top of a
7.7% increase for the same quarter last year.
- Same store customer count for the quarter increased 3.4% and
same store average ticket increased 4.1%.
- Net sales for fiscal 2011 were $963.8 million, a 5.2% increase
compared to $916.6 million for fiscal 2010.
- Net income from continuing operations for fiscal 2011 was $17.7
million compared to $4.7 million for fiscal 2010.
- Earnings per diluted share from continuing operations for
fiscal 2011 was $0.76 compared to $0.21 last year.
- They had no outstanding borrowings as of January 28, 2012
compared to $25.4 million outstanding borrowings last year.
- Non-GAAP EBITDA from continuing operations for fiscal 2011 was
$51.3 million compared to $39.5 million for fiscal 2010.
Looking ahead
The company is executing their plan to grow their total number of
stores to 500, but they are going to slow things down a bit in the
first half of 2012 until the economy shows improvement.
That said, Cost
Plus is expecting a 6% to 8% increase in year over year, same store
sales for Q1 2012 and a reduction in their Q1 net loss from
continuing operation to between -$0.03 and -$0.07 per diluted share
compared to -$0.13 per share for Q1 2011.
CPWM is targeting
to open five to ten new stores and the outlook includes an estimate
of eight new stores, including two relocations, compared to five
store closures and one relocation during fiscal 2011.
Earnings Estimates
In the past week alone since the report, we saw two analysts
revised their current quarter’s earnings estimates up as well as 1
upward revisions to next quarter’s results, 5 upward revisions for
current year and next year’s estimates got a boost from 4
analysts. There was only one negative revision from one
analyst for next quarter’s results.
Expectations are
for Cost Plus to lose 0.05 this quarter. Of the 6 analysts
that cover the furniture company, the consensus is for the company
to grow earnings by 46.27% in the current year (FY2012) and 11.24%
in FY2013.
In terms of the
magnitude of analyst estimate trends, we are seeing all of the
consensus estimates higher than they were 90 days ago, except for
next quarter’s estimate.
Cost Plus beat
estimates by 4% last quarter and has averaged an earnings surprise
of 20.17% over the past year.
Market Performance &
Technical’s
CPWM remains in a bullish pattern, but is seeing some profit taking
after rallying to new highs on the bullish report. Look for
$15.25 to be an area of strong support for the stock. Below
that the 50 day moving average remains a level that Cost Plus
hasn’t broken for more than a day since October of 2011. The 50 day
moving average currently stands at $14.29.
If the stock can
hold the $17.15 level, which is the bottom of most recent gap, then
the shares should continue their march higher.
Cost Plus has
outpaced the S&P 500 by 73% over the past year and almost 67%
over the past 3 months alone. The recent run and subsequent
gap on their earnings report enabled CPWM to beat the S&P by
26% over the past month!
Jared A Levy is the
Momentum Stock Strategist for Zacks.com. He is also the Editor in
charge of the market-beating Zacks Whisper Trader Service.
COST PLUS INC (CPWM): Free Stock Analysis Report
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