Fred’s Earnings: Here’s Why Investors are Not Excited Now

Fred’s Inc. (NASDAQ:FRED) delivered a profit and missed Wall Street’s expectations, AND came up short on beating the revenue expectation. The revenue miss is a negative sign to shareholders seeking high growth out of the company. Shares are down 1.6%.

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Fred’s Inc. Earnings Cheat Sheet

Results: Adjusted Earnings Per Share decreased 28% to $0.18 in the quarter versus EPS of $0.25 in the year-earlier quarter.

Revenue: Rose 7.2% to $533.4 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: Fred’s Inc. reported adjusted EPS income of $0.18 per share. By that measure, the company missed the mean analyst estimate of $0.2. It missed the average revenue estimate of $533.94 million.

Quoting Management: Commenting on the results, Bruce A. Efird, Chief Executive Officer, said, “The fourth quarter brought to a close a challenging year in 2012 as our customers remained under economic pressures and our operating costs trended higher than forecast. We were disappointed by the results, but now move forward with optimism about future opportunities and embark on a three-year reconfiguration plan designed to help us regain the momentum we experienced in the prior three years in driving toward our goal of increasing our operating margin to 4%.”

Key Stats (on next page)…

Revenue increased 18.38% from $450.57 million in the previous quarter. EPS decreased 0% from $0.18 in the previous quarter.

Looking Forward: Analysts have a more negative outlook for the company’s next-quarter performance. Over the past three months, the average estimate for next quarter’s earnings has fallen from a profit of $0.31 to a profit $0.3. For the current year, the average estimate has moved down from a profit of $0.94 to a profit of $0.84 over the last ninety days.

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(Company fundamentals provided by Xignite Financials. Email any earnings discrepancies to earnings [at] wallstcheatsheet.com)