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Finish Line tops Q1 estimate, reiterates FY17 EPS outlook

Finish LineFollowing the announcement of fiscal 2017 first-quarter results that beat the Wall Street estimates, the share price of sports footwear and apparel retailer Finish Line Inc. (FINL) hit a high of $20.98, from a low of $16.64 in one week time. However, in the past two trading sessions, the stock has lost some of its momentum. Considering the management’s guidance, as explained below, we believe that corrections in the share price should be used to take long positions. The stock closed at $19.65 on Tuesday.

The Indianapolis based company reported first-quarter revenue of $453.52 million, compared to $443.39 million in the similar period last year. The revenue estimate of analysts was $449.6 million.

Similarly, the reported net-income of $9.63 million or $0.23 per share also topped the analysts’ estimates of $0.22 per share for the first-quarter. However, the net income was lower than $13.79 million or $0.30 per share reported in the corresponding period of fiscal 2016.

CNBC

As of May 2016, the cash and cash equivalents of Finish Line increased to $85.39 million, from $82.19 million reported at the end of May 2015.

The comparable store sales rose 1.5% during the quarter ended May 28, 2016. However, it was lower than the analysts’ expectations of 2.1% same store sales growth. This is one of the reasons for the slight sluggishness in the share price.

The management stated that the supply chain disruptions will end in the second-quarter and that will trigger a period of consistent earnings growth. Taking this into account, Finish Line reiterated that it expects the comparable store sales growth for the full year 2017 to be between 3% and 5%. The premium retailer also confirmed that it anticipates fiscal 2017 earnings per share in the range of $1.50 to $1.56. Thus, fundamentally, we can expect an up-trend in the share price to begin soon.

Following the impressive results, the stock made a bullish breakout above the 50-day moving average of 18.35. The chart also indicates a strong support for the stock at 18.70. Minor resistance for the stock exists at 21, while the major resistance is at 25. The RSI has moved above the reading of 50, thereby indicating bullishness in the scrip. As indicated by the aqua coloured bubble, there exists a technical gap between 21 and 24. Thus, we expect the stock to rise and cover the gap soon.

Finish Line Stock Price: June 29th 2016

Finish Line Stock Price: June 29th 2016

So, a trader can earn from the price rise by purchasing a one touch call option from a binary broker. A target level of not more than $24 and an expiry date in the final week of July would support a positive outcome from the trade.


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