Cabela's Inc. - Value

The dark times of the great recession have passed for the specialty retailers. Cabela's Inc. (CAB) recently reported record third quarter revenue as it surprised on the Zacks Consensus for the fourth quarter in a row. Despite hitting new highs on the results, the stock is still a value, trading at just 14x forward estimates.

Cabela's who? Many investors have never heard of the retailer, which has only 31 retail stores across the U.S. and Canada and another 4 on the way.

But Cabela's, which specializes in hunting, fishing and camping products, also has a big catalog and Internet presence so fans across the country can order directly. Heck, you can even order your turkey dinner and pecan pie for Thanksgiving from the web site.

Cabela's Saw Record Revenue in the Fiscal Third Quarter

On Nov 2, Cabela's reported earnings per share which surprised on the Zacks Consensus by 10.7%. Earnings per share were 21 cents compared to the consensus of just 28 cents.

Revenue rose 3.9% to $643 million. Retail store revenue and financial revenue both gained in the quarter. Retail store sales jumped 6% to $369 million as same store sales also rose 2.4%. Financial services revenue also gained by 10.9% to $53 million. Direct revenue fell 1.1%, however, to $219 million.

Merchandise gross margins improved by 170 basis points to 34.5%, the largest increase in 3 years. Margins improved in all its merchandising categories.

Cash Registers Expected to Ring for the Holidays

Given the excellent results in the third quarter, Cabela's is very optimistic going into the holiday season.

It expects the fully year 2010 earnings to meet or exceed current expectations and, looking forward, expects earnings to grow at a double digit rate in 2011.

In the near term, the company has increased its direct marketing costs by mailing additional catalogs and increasing circulation. It is also hiring more seasonal workers in its retail stores.

Zacks Consensus Estimates Climb

Given the fourth beat in a row, and the optimistic outlook, it's not surprising that analysts have been raising the Zacks Consensus Estimates for 2010 and 2011.

7 out of 12 estimates have moved higher for 2010 with the Zacks Consensus rising 4 cents to $1.66 per share. This is earnings growth of 21.8%.

For 2011, 10 out of 13 estimates have jumped since the earnings report. The Zacks Consensus Estimate has moved 12 cents higher to $1.80 in that time. This is earnings growth of just 8%, which, given the company's outlook that its earnings will grow by double digits, is likely too low.

Still Some Value

Cabela's isn't the cheapest retailer out there. Shares have surged to a new 2-year high.

But its trading below its peers on several value metrics including its P/E and price-to-book ratio. The P/B ratio is at 1.6, under its peers' 2.2.

The Zacks #1 Rank (strong buy) stock also has a solid return on equity (ROE) of 12%.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.

 
CABELAS INC (CAB): Free Stock Analysis Report
 
Zacks Investment Research