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Factors Likely to Shape DICK'S Sporting's (DKS) Q2 Earnings

Zacks Equity Research

DICK’S Sporting Goods Inc. DKS is slated to report second-quarter fiscal 2019 results on Aug 22.

Notably, the company delivered positive earnings surprise in six of the last seven quarters. Moreover, it has an average trailing four-quarter beat of 16.2%.

Let’s see how things are shaping up ahead of the upcoming quarterly release.

How Are Estimates Moving?

The Zacks Consensus Estimate for second-quarter earnings is pegged at $1.21, indicating about 0.8% growth from the prior-year reported figure. The consensus mark has been stable in the past 30 days.

DICK'S Sporting Goods, Inc. Price and EPS Surprise

DICK'S Sporting Goods, Inc. Price and EPS Surprise

DICK'S Sporting Goods, Inc. price-eps-surprise | DICK'S Sporting Goods, Inc. Quote

For quarterly revenues, the consensus mark stands at $2.2 billion, suggesting an improvement of 1.1% from the year-ago quarter reported number.

Factors at Play

DICK’S Sporting is gaining from its omni-channel efforts and merchandising strategy. In fact, the company remains on track to build the best omni-channel experience by strengthening the store network and expanding e-commerce presence. Moreover, it is committed toward developing technology solutions for enhancing athlete experience and employee productivity.

In addition, DICK’S Sporting is undertaking initiatives to improve in-store experience. Notably, these initiatives include space reallocation to regionally growing categories, rollout of HitTrax technology and batting cages in several stores, expansion of strike point presentations, and investment in product development teams. In the first quarter, the company rolled out HitTrax technology and batting cages in roughly 150 stores, and intends to add this to 20 more stores in the second quarter.

DICK’S Sporting is also focused on private brands and is on track to launch new brands as part of its $2-billion sales goal in private brands.

Furthermore, DICK’S Sporting is experiencing positive same-store sales (comps) in the athletic apparel business and private brands. Management expects to deliver positive comps beginning the second quarter of fiscal 2019. All these are likely to boost the company’s top and bottom lines in the to-be-reported quarter.

However, persistent weakness in the hunting business has been hurting comps, which might remain a concern in the fiscal second quarter. The company plans to eliminate the hunting category from nearly 125 more stores (where the category is underperforming) in second-quarter fiscal 2019. Nevertheless, management expects hunt comps and sales to remain negative throughout fiscal 2019 owing to industry headwinds.

Additionally, DICK’S Sporting has been witnessing soft margins owing to the higher cost of investments. Higher shipping and fulfillment costs on account of strong e-commerce growth as well as inflationary headwinds driving freight costs are denting gross margin. Further, higher adjusted SG&A expense, as a percentage of sales, is weighing on operating margin. Increased SG&A expense is mainly attributed to continued investments in business. Persistence of such costs might remain a hindrance to the company’s margins and profitability in the to-be-reported quarter.

What Does the Zacks Model Say?

Our proven model does not show that DICK’S Sporting is likely to beat estimates in second-quarter fiscal 2019. A stock needs to have — a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) as well as a positive Earnings ESP — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Although DICK’S Sporting’s Zacks Rank #3 increases the predictive power of earnings beat, its Earnings ESP of 0.00% makes surprise prediction difficult.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat.

Target Corporation TGT has an Earnings ESP of +1.04% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Burlington Stores, Inc. BURL has an Earnings ESP of +0.35% and a Zacks Rank of 2.

Ross Stores, Inc. ROST has an Earnings ESP of +1.79% and a Zacks Rank #3.

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