Foot Locker, Inc. - Momentum

Foot Locker, Inc. (FL) recently jumped to a new multi-year high after reporting an impressive 94% Q3 earnings surprise in mid November. With an average earnings surprise of 51% over the last three quarters and a bullish growth projection, this Zacks #1 rank stocks scores more than a few points for team momentum.

Company Description

Foot Locker, Inc. operates as a retailer of athletic footwear and apparel worldwide. The company was founded in 1891 and has a market cap of $2.98 billion.

Shoe companies have been hot ahead of the holidays, with both retailers and manufacturers gaining on renewed consumer confidence. That dynamic was on display in mid November when Foot Locker reported strong Q3 results that came in ahead of expectations.

Third-Quarter Results

Revenue for the period was up 5.4% from last year to $1.28 billion. Earnings also came in strong at 33 cents, almost double the Zacks Consensus Estimate of 17 cents, where the company now has an average earnings surprise of 51% over the last four quarters.

The solid results were driven by strong same-store sales, up 8.1% from last year, and lower costs, with gross margin improving more than 300 Bps to 30.3%.

Share Buy Back

Foot Locker has also been busy returning value to its shareholders, repurchasing 1,135,000 shares of its common stock for $16.2 million during the quarter, bringing its full-year total to 2.5 million shares for $35.9 million.

Strong Financial Profile

The company also has a strong financial profile, with cash and short-term investments of $541 million and just $137 million in debt.

Estimates

We saw some decent movement in estimates off the good quarter, with the current year adding 19 cents to $1.04 and the next-year estimate gaining 18 cents to $1.19, a bullish 14% growth projection.

Valuation

But in spite of the recent gains, the valuation picture is still in check, with a forward P/E of 18X only a slight premium to its peers 16X.

6-Month Chart

On the chart, FL has been rallying with the market since early September, with shares recently jumping higher to a new multi-year high on the good quarter. The MACD below the chart is bullish too, with the short-term average trending ahead of the long-term average. Look for support from the trend line on any weakness, take a look below.

Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the new Zacks Momentum Trader Service.
 
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