Leading sportswear chain Foot Locker, Inc. (NYSE:FL) reported fourth-quarter earnings on Friday. FL stock is charging following a top-line beat and a bottom-line match.
Foot Locker joins the 66% of S&P 500 companies have beaten Wall Street’s expectations for their fourth-quarter earnings, with the blending growth rate coming to 4.6%. That means the fourth quarter will mark the first time the index has seen year-over-year growth in earnings since early 2015.
As of its last report, the company had just shy of 3,400 stores in 23 countries, with Foot Locker U.S. making up nearly 1,000 of those.
Since the depths of the recession, Foot Locker stock has posted a relatively consistent recovery. It hit a bump in late 2015, regained those losses in 2016, and has been flat so far this year. I believe the most recent cool-off was serving as the base for another run in FL, which will be sparked by today’s fantastic earnings report.
Here are three specific reasons why.
FL Stock By the Numbers
Favorable earnings: For the fourth quarter, analysts expected earnings of $1.32 per share vs. just $1.16 a year ago. Earnings actually came to $1.37, which represents 18% growth. Looking forward, double-digit earnings growth is on tap for next quarter and each of the next two full years, while FL expected to be just shy of that for its five-year average.
Foot Locker has beaten expectations in each of the past three quarters and is posting consistent sales and same-store sales growth of around 5%, including another 5% gain this quarter.
Fundamentals: Foot Locker’s cash is nearly 7 times its debt, while its return on equity and assets are 24% and 17%, respectively. That cash should help ensure Foot Locker keeps rewarding loyal investors with a dividend. At current levels, FL stock sports a forward yield of 1.7%. That’s not too shabby, considering this pick offers substantial earnings growth too.