Cabela's Earnings Preview: Looking to Extend a Streak

Cabela's CAB is scheduled to report third-quarter 2011 results Thursday, October 27, before the markets open. Consumers have been clamping down on discretionary spending due to economic conditions. But this specialty retailer is looking to continue its streak: it has seen net income rise in three straight quarters and revenue has risen in the past four quarters. Analysts on average predict that Cabela's will report earnings of $0.44 per share, up 29.5% from the same quarter of last year. That EPS estimate is unchanged over the past 90 days. And note that Cabela's earnings have not fallen short of consensus estimates in the past ten quarters. The forecast also calls for the company to post revenues of $681.5 million, which would be 5.9% higher than a year ago. Looking ahead to the current quarter, which will include the holiday season, analysts so far are looking for 4.0% year-over-year growth in revenues. And the forecast for the full year so far calls for revenues up 5.0% from a year ago, with per-share earnings 12.0% higher. The Company Cabela's is a retailer and direct marketer of hunting, fishing, camping and related outdoor merchandise. The Nebraska-based company operates 33 stores in the United States and Canada, as well as its subsidiary, World's Foremost Bank. The company was founded in 1961 and now has a market cap of $1.8 billion. During the three months that ended in September, the company announced new stores in Charleston, W.V., and Rogers, Ark. Cabela's also announced that it had hired a new executive in charge of marketing and e-commerce. Performance The company has a long-term earnings per share growth forecast of 14.6% and a PEG ratio of 0.9. Its 14.5 P/E ratio is lower than the industry average, and its 7.8% operating margin is higher than the industry average. Seven out of 11 analysts who follow the stock rate it a Buy or Strong Buy, and they have a mean price target of $30.44 per share, which is 15.6% higher than the current share price. The share price has jumped more than 16% in the past month, finally recovering from the sell-off in August. The stock is about 18% higher than at the beginning of the year, but more than 20% lower than the 52-week high of $32.37 per share. The price is now above the 50-day and 200-day moving averages. The stock has outperformed competitors such as Dick's Sporting Goods DKS and Hibbett Sports HIBB since the beginning of the year. Action Items: Bullish: Investors interested in exchange traded funds invested in Cabela's might want to consider the following trades:

• SPDR S&P Retail XRT is more than 20% higher than a year ago.
• SPDR S&P 600 Small Cap Growth ETF SLYG is about 11% higher than a year ago.
• PowerShares S&P SmallCap Consumer Discretionary PSCD is more than 5% higher than a year ago.

Bearish: Traders may want to consider these alternative positions:

• ProShares UltraShort SmallCap600 SDD is more than 7% higher than six months ago.
• ProShares Short SmallCap600 SBB is more than 7% higher than six months ago.

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