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Dick's (DKS) Down 17.7% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Dick's Sporting Goods (DKS). Shares have lost about 17.7% in that time frame, underperforming the S&P 500.

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

DICK'S Sporting Q3 Earnings & Sales Beat, View Up

DICK'S Sporting Goods posted better-than-expected third-quarter fiscal 2021 results, wherein both top and bottom lines improved year over year. The results gained from customer demand and improved product assortment, which in turn led to strong sales and merchandise margin momentum. The company also remains on track with the transformational plan. It also noted that the company kickstarted the fiscal fourth quarter on a good note. Management raised its fiscal 2021 view.

Quarter in Detail

In the fiscal third quarter, adjusted earnings were $3.19 per share, up 59% from the prior-year figure of $2.01. The figure surpassed the Zacks Consensus Estimate of $1.93 per share. The uptick can be attributable to solid sales and improved gross margins in the reported quarter. Adjusted earnings also surged more than sixfold from third-quarter fiscal 2019.

Net sales of $2,747.6 million grew 13.9% year over year and beat the Zacks Consensus Estimate of $2,467 million. The uptick can be attributable to improved store sales and a robust online show. Net sales also advanced 40% from third-quarter fiscal 2019.

Consolidated same-store sales (comps) advanced 12.2% compared with comps growth of 23.2% and 6% in third-quarter fiscal 2020 and third-quarter fiscal 2019, respectively.

E-commerce sales surged 97% from third-quarter fiscal 2019 and rose 1% year over year. E-commerce accounted for nearly 19% of net sales in the reported quarter, up from 13% in third-quarter fiscal 2019 and roughly 21% from third-quarter fiscal 2020.

Gross margin expanded 354 basis points (bps) year over year to 38.5% in the quarter under review, driven by robust sales and merchandise margins. SG&A expenses of 23%, as a percentage of sales, contracted 151 bps year over year and 325 bps from third-quarter fiscal 2019. The company incurred nearly $15 million of COVID-related safety costs in the nine months ended Oct 30, 2021.

Financial Aspects

DICK'S Sporting ended the reported quarter with cash and cash equivalents of $1,372.9 million, no borrowings under the $1.9-billion revolving credit facility, and total stockholders' equity of $2,530.8 million. Total inventory rose 7.3% year over year as of Oct 30, 2021.

In the nine months ended Oct 30, 2021, total capital expenditure amounted to $203.4 million. The company now projects capital expenditure of $370-$395 million, on a gross basis, for fiscal 2021.

The company has approved quarterly dividend of 43.75 cents per share on common stock and Class B common stock, which is likely to be paid out on Dec 29 to shareholders on record as of Dec 10. DICK’S Sporting paid more than $500 million in the form of dividends in the reported quarter.

It repurchased 2.17 million shares worth $125.8 million during the fiscal third quarter. Following this, the company has roughly $605.1 million under the existing authorization, which is valid till June 2024. It also projects share repurchase of at least $400 million for fiscal 2021.

Guidance

Driven by impressive quarterly results and a solid start to the fiscal fourth quarter, management raised its fiscal 2021 view. Fiscal 2021 sales are expected to be $12,120-$12,190 million, up from the previously mentioned $11,520-$11,720 million. Same-store sales are likely to grow 24-25%, up from the earlier projection of 18-20%. Adjusted earnings are now envisioned to be $14.6-$14.8, reflecting a sharp improvement from $12.45-$12.95 per share mentioned earlier.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 15.07% due to these changes.

VGM Scores

At this time, Dick's has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile 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 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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