Traders initially seemed thrilled with Wednesday's third-quarter earnings report from Lumber Liquidators (NYSE: LL), but the stock then backpedaled into the red. The retailer banked a quarterly profit of $7.8 million, or 28 cents per share, up from its year-ago net income of $5.5 million, or 20 cents per share. Revenue for the period surged 14% to $140.5 million. The results comfortably outpaced analysts' consensus estimates, which called for a profit of 24 cents per share on $137.1 million in revenue.
Looking ahead, Lumber Liquidators is forecasting full-year revenue of $535 million to $543 million, up from its previous guidance of $528 million to $538 million. Earnings for fiscal 2009 are expected to range between 90 cents and 95 cents per share, compared to the retailer's previous forecast of 85 cents to 91 cents per share. Wall Street, on average, is expecting full-year earnings of 90 cents per share on $537.1 million.
Shares of LL were up more than 7% at an intraday peak of $24.48, but the equity then slipped to a loss of roughly 3%. The $24.50 region has acted as a technical ceiling for the stock since early October; meanwhile, solid support from the equity's 80-day moving average is rising through the $21 neighborhood.
The stock's sudden reversal into the red is intriguing, because a lofty 16.1% of LL's float has been sold short. Such hefty accumulations of short interest can often contribute to substantial short-squeeze rallies, especially in the wake of a solid earnings report and upbeat outlook. These bearish bettors may have been emboldened by the security's rejection from short-term resistance, putting the brakes on any potential mass exodus by the shorts.
Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.
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