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Dick's (DKS) Up 14.2% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Dick's Sporting Goods (DKS). Shares have added about 14.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Dick's due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

DICK'S Sporting Q4 Earnings & Sales Beat on High Demand

DICK'S Sporting reported better-than-expected fourth-quarter fiscal 2020 results. Further, both top and bottom lines improved year over year. Results gained from favorable customer demand, a solid product portfolio and advanced omnichannel capabilities. Going forward, the company noted that this strong momentum continued in fiscal 2021.

Q4 in Detail

In the fiscal fourth quarter, adjusted earnings skyrocketed 84.1% to $2.43 per share. The figure also surpassed the Zacks Consensus Estimate of $2.21 per share.

Net sales of $3,125 million rose 19.8% year over year and exceeded the Zacks Consensus Estimate of $3,020 million. This uptick can be attributable to improved store sales and a robust online show. Notably, consolidated same-store sales (comps) grew 19.3%, driven by strength in hardlines, apparel and footwear stemming from favorable consumer demand.

E-commerce sales surged 57% year over year, representing nearly 32% of net sales in the reported quarter compared with 25% in the prior-year quarter. The upside can be attributed to increased consumer adoption of in-store pickup and curbside facilities.

Gross margin expanded roughly 560 basis points (bps) to 33.7% in the quarter under review. Meanwhile, SG&A expenses, as a percentage of sales, expanded 6 bps year over year to 24.4%. This is inclusive of $47 million of extra compensation and safety expenses associated with COVID-19.

Financial Aspects

DICK'S Sporting ended fiscal 2020 with cash and cash equivalents of $1,658.1 million, no borrowings under its $1.9-billion revolving credit facility and total stockholders' equity of $2,339.5 million. Further, total inventory declined 11.3% year over year as of Jan 30, 2021.

In fiscal 2020, total capital expenditure amounted to $224 million. The metric is projected to be $345-$370 million.

Also, the company has approved a quarterly dividend of 36.25 cents per share on common stock and class B common stock, which reflects a hike of 16% from the earlier one. This dividend is likely to be paid out on Mar 26 as of shareholders’ record on Mar 19.

FY21 Guidance

Driven by solid growth across golf, athletic apparel, footwear, team sports and fitness categories along with continued momentum in athletic apparel and footwear businesses, management issued the fiscal 2021 view. Fiscal 2021 sales are expected to be $9,544-$9,935 million with same store sales likely to be down 2% to up 2%. Moreover, adjusted earnings are envisioned to be $4.4-$5.2 per share. Further, it projects share repurchase of at least $200 million. Gross margin and SG&A expenses are forecasted to decline year over year in fiscal 2021. Also, it noted that this guidance includes COVID-related costs to the tune of $30 million for the first half of fiscal 2021. For the first quarter of fiscal 2021, management expects same store sales and bottom-line growth.

Apart from these, the company plans to open six new DICK'S Sporting Goods stores and specialty concept stores each this year. Also, it anticipates relocating 11 DICK'S Sporting Goods stores along with converting two Field & Stream stores into Public Lands stores. Further, it is making efforts to strengthen its footwear business by converting more than 100 stores to full-service footwear stores.

 

 

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 19.74% due to these changes.

VGM Scores

Currently, Dick's has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Dick's has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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