Five Below Analysts Break Down Q3 Earnings: 'Plenty Of Potential For Upside'

Shares of Five Below Inc FIVE traded higher by 2% on Thursday after the company reported better-than-expected earnings and revenue numbers for the third quarter.

The Earnings: Five Below reported third-quarter adjusted EPS of 43 cents on revenue of $607.6 million. Both numbers topped consensus analyst estimates of 29 cents and $563.9 million. Revenue was up 27.3% from a year ago.

Operating income was up 75% to $42 million in the third quarter. The company’s store count was also up 15.2% from a year ago to 1,173total stores in 40 different U.S. states.

Looking ahead, Five Below said its long-term goal is to reach 2,500 total stores. It also guided for fourth-quarter revenue of between $985 million and $1.005 billion. The company expects adjusted EPS of between $2.36 ad $2.48.

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Voices From The Street: Wells Fargo analyst Edward Kelly said Five Below’s impressive third-quarter numbers are a testament to its consistent execution.

“Q4 guidance was a touch softer than one would expect after this performance, but the company has its holiday inventory and there looks to be plenty of potential for upside,” Kelly wrote in a note.

KeyBanc analyst Bradley Thomas said Five Below’s long-term outlook remains compelling.

“While freight related pressure is expected to increase in the quarters ahead, we believe FIVE is doing an admirable job at mitigating these costs, benefiting from increased efficiency and growing scale,” Thomas wrote.

Telsey Advisory Group analyst Joseph Feldman said Five Below has multiple growth drivers, including adding new stores, rolling out Five Beyond and expanding into new categories, such as digital and gaming.

“Five Below's 4Q21 EPS guidance of $2.36- $2.48 is a touch below FS at $2.50, but was above our prior forecast of $2.35, and it incorporates higher store operations, marketing, and supply chain costs, including the handling of delayed inventory receipts that shifted to 4Q21 from 3Q21,” Feldman wrote.

Ratings And Price Targets:

• Wells Fargo has an Overweight rating and $240 target.
• KeyBanc has a Sector Weight rating.
• Telsey Advisory Group has an Outperform rating and $235 target.
• Photo: Michael Rivera, Wikimedia