The Buckle (NYSE:BKE) Is A Deep-Value, High-Yield Growth Stock

The Buckle Continues To Defy the Odds

The Buckle (NYSE:BKE) defied the odds in the 2nd quarter and delivered results that far exceeded the consensus estimates. The company, a teen-retailer heavily dependent on brick&mortar, not only reported YOY growth but a near-100% increase in eCommerce that carried through into the 3rd. Now, with the 3rd quarter report in the bag, shares are trading at a key support level and could be headed higher.

Before I move on, there are two factors investors need to be aware of. The impressive 150% rally that occurred between August 2020 and now was driven in part by a large 30% short-interest. The shorts are less bearish than they were then but not by much. The short-interest is still running above 22% and could provide fuel for another double-digit surge in share prices. More recently, price action was spurred by the dividend.

The company resumed paying its dividend last month at the same rate as before. The stock is yielding about 3.0% with shares near $28 but that’s not the whole story where distributions are concerned. This company has 1) and very healthy balance sheet that includes large amounts o cash and low amounts of debt and 2) a history of annual special dividends. The special dividend was paid regularly for the last 12 years and brings the yield outlook closer to 5% than 3%. If the company follows true to form the special will be announced next month payable in January.

The Buckle Beats The Consensus, Again

The Buckle smashed right through its consensus estimates but that isn’t really saying much. The company can only boast a single sell-side rating and that one is bearish. Cfra sees this stock down about 60% from its current levels but I warn you. That estimate is based on old data, it came out in May and does not reflect the 2nd or 3rd quarter results. The number one takeaways for the 3rd quarter is this; sales are strong, growing, and accelerating from earlier in the year with the all-important holiday season still ahead.

In the 3rd quarter, Buckle reported revenue of $251 million. This is 750 basis points better than expected and up 12% over the same quarter last year. In the 2nd quarter, revenue grew by 6.0%. On a comp basis, same store sales are up 12.4% and slightly offset by the impact of lingering store closures in harder hit areas. Comps were driven by a 75% increase in eCommerce. eCommerce sales growth slowed in the 3rd quarter on a YOY basis but increased by nearly 1.0% over the prior quarter.

Moving down, the company’s net income increased by 60% over the last year. The GAAP EPS came in at $0.85 or $0.30 better than expected and up $0.14 or 20% from the prior quarter. The company didn’t give any formal guidance for the coming quarter but did let us know comps are still strong. The October comps came in at 12.1%, down slightly from the 3rd quarter average but still very strong.

Buckle Is A Deep Value Getting Deeper

Shares of Buckle offer a discount versus the broad market trading at 14x this year’s and only 12X next year’s earnings and that is versus the consensus. The reality is that YTD EPS has the company trading closer to 12X this year’s and 10X next year’s earnings and there is the yield to consider as well. The 3.0% you get from the regular distribution is good enough on its own to nearly double the S&P 500 average. Add in the special dividend and I call this a high-yield value stock.

The Technical Outlook: Buckle Is Trading At Key Support

Shares of Buckle are trading at a key support level and likely to move higher if the 3rd quarter earnings are any indication. The short-interest is high, I know, but I don’t see any reason to be short this stock right now and every reason to own it. Support is near the pre-COVID high of $26.75 and it looks like it could be strong. The short-term EMA is just under that level and will add its own support as well. The indicators are a little weak suggesting support will be tested by I expect a buy-signal to develop if it does. If not, this stock will likely bounce higher and make a run at the $31.