The Zacks Analyst Blog Highlights:Hibbett Sports, Dick's Sporting Goods, Big 5 Sporting Goods, Cabela's and Universal Forest Products

Apr 25, 2013, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, April 25, 2013 /PRNewswire/ -- announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Hibbett Sports Inc. (Nasdaq: HIBB), Dick's Sporting Goods Inc. (NYSE: DKS), Big 5 Sporting Goods Corp. (Nasdaq: BGFV), Cabela's Inc. (NYSE: CAB) and Universal Forest Products, Inc. (Nasdaq: UFPI).


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Here are highlights from Wednesday's Analyst Blog:

Hibbett Downgraded to Neutral

We downgraded our long-term recommendation on Hibbett Sports Inc. (Nasdaq: HIBB) to Neutral from Outperform on Apr 17, anticipating competitive risk. Our recommendation is also well supported by the stock's Zacks Rank #3 (Hold).

Why the Downgrade?

We remain apprehensive about Hibbett's growth prospects as its competitor and leading sporting goods retailer, Dick's Sporting Goods Inc. (NYSE: DKS), has decided to enter smaller and mid-sized markets. We believe that Dick's strategy will not only heighten competition, but will also pose challenges for Hibbett's retail space acquisitions. This may increase Hibbett's store occupancy costs and operating expenses.

Moreover, Hibbett fears that Dick's recent initiative may negatively impact its operating performance in the current fiscal. Following this, the Zacks Consensus Estimates for fiscal years 2014 and 2015 fell 0.7% and 2.8% to $3.00 and $3.42, respectively in the last 60 days.

However, we still remain constructive on the stock, given Hibbett's strong operating performance over the last several quarters. We expect it to continue posting earnings as well as revenue growth in the coming quarters. The company anticipates fiscal 2014 earnings between $2.85 and $3.05 per share compared with fiscal 2013 earnings of $2.72.

Moreover, we remain impressed by the company's store expansion program. The company plans to augment its network by adding approximately 65 to 70 stores during fiscal 2014. Furthermore, Hibbett's management has already identified over 400 locations for future stores and has ramped up its distribution center to support over 1,200 stores from its earlier 1,000 stores. We believe that the strategy of expanding its store base provides a strong upside potential to the company.

Additionally, we believe that the strategy of doubling the size of its distribution facility will bolster growth in mid-sized and smaller markets, on which the company is focusing.

Other Stocks Worth Considering

While we prefer to remain on the sidelines on Hibbett there are other stocks in the sporting goods retail industry that warrant a look, such as Big 5 Sporting Goods Corp. (Nasdaq: BGFV) and Cabela's Inc. (NYSE: CAB). Currently, both the companies hold a Zacks Rank #1 (Strong Buy).

Universal Forest Upgraded

We have recently upgraded Universal Forest Products, Inc. (Nasdaq: UFPI) from Underperform to a Neutral recommendation, anticipating its performance to be in line with the broader market.

Why the Upgrade? Universal Forest Products is a large player in the lumber supply chain consuming approximately 7% of the North American softwood lumber production annually. The stock has grown roughly 9% year-to-date and is quite likely to perform well in the quarters ahead.

If we steal a look into the company's first quarter 2013 results, we find that the Universal Forest provided upbeat results for the quarter. Earnings per share came in at 26 cents, up 24% year over year and way above the Zacks Consensus Estimate of one cent. Revenue grew 21% on the back of very fine performance in its five market segments. Unit sales increased 2% while prices rose by 19% in the quarter.

Management of Universal Forest looks forward to improving its top-line growth through additions of new customers and products to its portfolio. The company aims to be a $3 billion company on the back of roughly a 15% improvement in productivity and a three percentage point improvement in profitability by 2014.

We believe Universal Forest is progressing well towards achieving its set targets. Also, expansion through meaningful acquisitions has been the company's favoured mode of forging ahead. Of the many acquisitions it has made, the recently acquired Nepa Pallet and Custom Caseworks assets have served to strengthen the company's foothold in Northwest United States and industrial business, respectively.

Universal Forest has also been rewarding its shareholders through regular dividend payments with increases at regular intervals. Recently, the company received its Board of Directors' approval for a semi-annual dividend payment to its shareholders.

All these positives forced us to upgrade our view on Universal Forest, which was restricted to a Neutral recommendation due to some near-term concerns surrounding the stock. Rising costs have been a major hurdle for the company; cost of goods sold increased 23.3% while selling, general and administrative rose by 5.4% year over year in the first quarter of 2013.

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