Buy Dick's Sporting Goods (DKS) Stock Before Earnings, After Foot Locker Beat?

Shares of Foot Locker FL soared over 17% after the sports apparel retailer posted better-than-expected quarterly financial results Tuesday. The question now is should Foot Locker’s strong performance make investors think about buying Dick's Sporting Goods DKS stock before it reports its Q3 earnings results next week?

Quick Foot Locker Overview 

Foot Locker saw its quarterly revenues decline 0.5% from $1.87 billion in the year-ago period to hit $1.86 billion in Q3, which still topped our Zacks Consensus Estimate. Plus, the retailer’s comparable store sales jumped 2.9%. The company also saw its adjusted quarterly earnings climb 9.2% to reach $0.95 per share and beat our estimate by 3 cents.

Foot Locker has benefited from both Nike NKE and Adidas’ ADDYY slimmed down wholesale businesses because FL has remained a top priority outside of their own direct-to-consumer expansion. Nike and Adidas both saw their stock prices pop over 2% Wednesday morning. Meanwhile, shares of Under Armour UAA jumped 4.5%.

Dick's Sporting Goods

Dick's Sporting Goods has to deal with an interesting period for the industry as sports apparel giants shift their focus toward their own stores and online sales in the Amazon AMZN age. Some of this was reflected in Dick’s second-quarter results, which saw same-store sales drop 4%.

However, the company’s adjusted quarterly earnings surged roughly 16.5% to reach $1.20 per share, which crushed our $1.04 estimate. DKS raised its full-year earnings guidance to between $3.02 and $3.20, up from its previously guided range of $2.92 to $3.12. On top of that, Dick's Sporting Goods e-commerce sales jumped 12%.

Price Movement

Moving on, shares of DKS have climbed roughly 24% over the last 12 months to outpace its industry’s 20% climb. DKS stock is also up 17% in the past six months, which looks amazing compared the S&P 500’s 3% decline.

Shares of Dick's Sporting Goods popped 1.9% through mid-morning trading Wednesday to touch $35 per share. This marked a 12% downturn from its 52-week high of $39.75 per share—which might set up a better buying opportunity for those high on DKS stock. It is worth noting that the sports retailer’s impressive 2018 comes after its shares tumbled to a nearly seven-year low last November.

Valuation

DKS stock is currently trading at 10.5X forward 12-month Zacks Consensus EPS estimates. This represents a substantial discount compared to the S&P’s 15.8X and its industry’s 14.1X that includes Hibbett Sports HIBB and Big 5 Sporting Goods BGFV. DKS has traded as high as 13.2X over the past year, with a one-year median of 11.4X.

Jumping back over the last 10 years, we can see that its valuation picture appears rather attractive at the moment.

Outlook & Earnings Trends

Looking ahead, our current Zacks Consensus Estimate is calling for Dick’s Q3 revenues to fall 3.6% to hit $1.87 billion. Worst still, the company’s Q3 same-store sales are projected to sink 4% after slipping 0.90% in the year-ago quarter, based on our NFM metrics estimates.

DKS’ adjusted quarterly earnings are also projected to fall 13.3% from the year-ago period to $0.26 per share. However, the company’s full-year EPS figure is projected to pop 4.65%.

Investors should also note that DKS has received two full-year earnings estimate revisions for fiscal 2018 over the last 30 days, against zero downward changes. This means at least some analysts are more positive about the company’s earnings picture. Plus, the retailer has earned one positive revision for Q3, without a downgrade, in the past seven days.

Bottom Line

Dick’s Sporting Goods recent positive earnings estimate revision activity helps the company earn a Zacks Rank #2 (Buy). And we should remember that its stock price currently sits well-below its 52-week high and the positive, post-earnings movement from some of its retail peers is a good sign.

Yet, its top and bottom line estimates don’t paint the best picture. Therefore, it might be a good idea to be cautious about DKS at the moment.

Dick's Sporting Goods is scheduled to release its Q3 financial results before the market opens on Wednesday, November 28.

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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
Foot Locker, Inc. (FL) : Free Stock Analysis Report
 
Hibbett Sports, Inc. (HIBB) : Free Stock Analysis Report
 
Big 5 Sporting Goods Corporation (BGFV) : Free Stock Analysis Report
 
DICK'S Sporting Goods, Inc. (DKS) : Free Stock Analysis Report
 
NIKE, Inc. (NKE) : Free Stock Analysis Report
 
Adidas AG (ADDYY) : Free Stock Analysis Report
 
Under Armour, Inc. (UAA) : Free Stock Analysis Report
 
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