Why Is Dick's (DKS) Up 19.6% Since Last Earnings Report?
It has been about a month since the last earnings report for Dick's Sporting Goods (DKS). Shares have added about 19.6% 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 Q3 Earnings & Sales Beat Estimates
DICK'S Sporting posted third-quarter fiscal 2023 results, wherein the top and bottom lines beat the Zacks Consensus Estimate and improved year over year. Despite the challenging macro-economic environment, the company has been benefiting from the strong back-to-school season and continued market share gains. It is on track with business optimization to streamline the overall cost structure.
Q3 in Detail
Adjusted earnings were $2.85 per share in the fiscal third quarter, up 10% from the prior-year figure of $2.60. Also, the metric beat the Zacks Consensus Estimate of $2.42 per share.
Net sales of $3,042 million improved 2.8% year over year and surpassed the Zacks Consensus Estimate of $2,956 million. The upside can be attributable to strong comparable store sales (comps) and healthy transaction growth.
Consolidated comps grew 1.7% year over year. However, the figure lagged our estimate of 2.1% growth. This was driven by higher transactions and average ticket.
Gross profit rose 4.8% year over year to $1,061 million and came ahead of our estimate of $1,048.2 million. Meanwhile, the margin expanded 67 basis points (bps) year over year to 34.9% in the fiscal third quarter.
In the fiscal third quarter, the SG&A expense rate of 25.5% expanded 254 bps year over year. SG&A expenses, in dollar terms, increased 14% to $776 million and beat our estimate of $763.9 million.
Financial Aspects
DICK’S Sporting ended the fiscal third quarter with cash and cash equivalents of $1,406.2 million, and no borrowings under the $1.6-billion revolving credit. Total inventory fell 2.3% year over year to $3,282.9 million as of Oct 29, 2023.
On Nov 20, 2023, the board authorized and declared a quarterly dividend of $1.00 per share on the company's common stock and Class B common stock. The dividend is payable Dec 29, 2023, to stockholders of record at the close of business on Dec 15, 2023.
The company repurchased 3.5 million shares of its common stock for $388 million under its share repurchase program. As of Oct 28, 2023, it has $780 million remaining under its authorization.
As of Oct 28, 2023, net capital expenditure amounted to $409.5 million. DICK’S Sporting projects capital expenditure of $670-$720 million on a gross basis and $550-$600 million on a net basis for fiscal 2023.
Guidance
Driven by the impressive quarterly results, management has revised its fiscal 2023 view. For fiscal 2023, the company expects comps growth of 0.5-2%, in sync with our estimate of 1.9% growth.
DKS envisions adjusted earnings of $12.00-$12.06 compared with the earlier stated $11.33-$12.13 per share and our estimate of $11.70. The adjusted earnings view assumes 86 million shares outstanding as of fiscal 2023. Also, the company’s effective tax rate is expected to be 21%.
Store Update
In the reported quarter, the company opened two DICK'S House of Sport stores. The total store count came in at 725, including 104 Golf Galaxy stores, seven Public Lands stores and 17 Going Going Gone! Stores, as of Oct 28, 2023.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
At this time, Dick's has a subpar Growth Score of D, a grade with the same score on the momentum front. 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 C. 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.
Performance of an Industry Player
Dick's is part of the Zacks Retail - Miscellaneous industry. Over the past month, ODP Corp. (ODP), a stock from the same industry, has gained 10.6%. The company reported its results for the quarter ended September 2023 more than a month ago.
ODP Corp. reported revenues of $2.01 billion in the last reported quarter, representing a year-over-year change of -7.5%. EPS of $1.88 for the same period compares with $1.48 a year ago.
For the current quarter, ODP Corp. is expected to post earnings of $0.72 per share, indicating a change of -15.3% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.
ODP Corp. has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.
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DICK'S Sporting Goods, Inc. (DKS) : Free Stock Analysis Report
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