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Mixed Indications Ahead Of Finish Line's Q1 Report

ADDYY | June 22, 2016

Baird analysts Jonathan Komp and Benjamin Bray see mixed indications from Finish Line Inc (NASDAQ: FINL) ahead of its first-quarter results. The brokerage maintains its Neutral rating and $20 price target on the company.

The analysts were "intrigued" by the company's attractive valuation, despite top-line performance's mixed indications. Therefore, they remain on the sidelines.

"While we have viewed current F2017E guidance as potentially conservative and we think the stock could be appropriate for patient longer-term investors, we prefer to see additional signs of progress on sustaining better core operating fundamentals before assuming a re-rating higher from current levels," the analysts said in a research note.

The brokerage sees a number of mixed indicators related to comps, "On the one hand, industry fundamentals were more challenged following the company's March update (when comps began the quarter tracking +mid-single-digits), and FINL's level of online discounting seems to have increased sequentially to elevated levels during April-May and into June."

Baird noted a positive: "Industry trends appear to have improved in recent weeks." Furthermore, the analysts have seen Finish Line feature more popular styles from adidas AG (ADR) (OTC: ADDYY), "suggesting a more positive trend in FQ2-to-date is possible, even though the June comparison (vs. +7.9 percent) does not appear particularly easy."

Moving ahead, the brokerage expects Finish Line to reiterate its estimated earnings of $1.50–$1.60 a share for the fiscal year 2017. The consensus called for an EPS of $1.54. The analysts think that it appears to be conservative in respect of costs and comps.

At time of writing, Finish Line was up 1.06 percent at $17.72.