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Dick's Sporting Goods Inc. and Adobe Inc. highlighted as Zacks Bull and Bear of the Day

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For Immediate Release

Chicago, IL – February 2, 2022 – Zacks Equity Research Shares Dick’s Sporting Goods Inc. (DKS - Free Report) as the Bull of the Day, Adobe Inc. (ADBE - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Ford (F - Free Report) , O'Reilly Automotive (ORLY - Free Report) and BorgWarner (BWA - Free Report) .

Here is a synopsis of all five stocks:

Bull of the Day:

Dick’s Sporting Goods Inc. is a popular, well-known retailer where customers can find a wide range of sporting goods products: athletic shoes; fitness apparel and accessories; and a broad selection of outdoor and athletic equipment for team sports, camping, fishing, tennis, golf, and water sports.

Third Quarter Earnings Deliver the Goods

Last November, Dick’s Sporting Goods reported impressive results for its fiscal third quarter.

Net sales of $2.75 billion were a record, up 13.9% year-over-year and 40% compared to Q3 2019. Consolidated same store sales spiked 12.2% on top of a 23.2% increase in 2020, while e-commerce sales surged 97% compared to 2019. E-commerce now makes up 19% of total net sales.

On a non-GAAP basis, DKS posted earnings of $3.19 per share, flying past estimates of $1.93 per share.

Dick’s ended the quarter with $1.37 billion in cash and cash equivalents, and total inventory increased 7.3%.

President & CEO Lauren Hobart said in the earnings release that consumer demand “remained strong,” and Dick’s “differentiated product assortment” helped drive momentum for sales and merchandise margins.

Dick’s Sporting Goods also raised its adjusted EPS outlook, and now anticipates its bottom line to clock in between $14.60 and $14.80 per share

DKS Offers Growth & Value

Over the past one-year period, shares of Dick’s have climbed over 56% compared to the S&P 500’s gain of 17%. Estimates have been rising too, and DKS is a Zacks Rank #1 (Strong Buy) right now.

For the current fiscal year, nine analysts have revised their bottom-line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up from $14.45 per share to $15.40 per share. Earnings are expected to see triple-digit growth for fiscal 2021, increasing more than 150%.

Like fellow sports and outdoor recreational retailers, DKS saw a sales boom during the pandemic as people stuck at home looked to spend more time outside. The company benefited from social distancing as well, as outdoor activities allowed people to safely spend time with their loved ones.

Q3 2021 marked the third consecutive “beat-and-raise” quarter for Dick’s Sporting Goods. With this kind of growth, you’d expect to pay up, but DKS trades at only a 7.4X forward earnings multiple.Even more, Dick’s has a solid dividend that yields 1.6% on an annual basis.

If you’re an investor searching for a retail stock to add to your portfolio, make sure to keep DKS on your shortlist.

Bear of the Day:

Adobe Inc., based in San Jose, California, is one of the largest software companies in the world. The company operates through three segments—Digital Media, Digital Experience, and Publishing—while the bulk of its revenue is formed through licensing fees from customers; Adobe also offers technical support and education services.

Soft Guidance Hurts ADBE

Shares of Adobe slumped 10% following the release of its fiscal fourth quarter earnings results, though the company delivered meaningful growth on both the top and bottom line.

Revenue jumped 20% year-over-year to $4.1 billion, and sales for its creative, digital media, digital experience, and document cloud divisions increased 19%, 21%, 23%, and 29%, respectively.

These revenue gains helped Adobe generate gross profit growth of $3.6 billion, also up 20%. Adjusted operating income and earnings moved 21% and 14% higher to $1.5 billion and $3.20 per share.

Guidance for fiscal 2022 was muted, however. Management expects total sales to increase by about 13% to $17.9 million, with adjusted EPS to increase 10% to $13.70 per share. Wall Street was looking for revenue of $18.2 billion and EPS of $14.26.

Because of this lowered outlook, analysts largely cut their price targets on ADBE, with some wondering if Adobe will be able to maintain its historically strong growth rate moving forward.

Bottom Line

ADBE is a Zacks Rank #5 (Strong Sell).

10 analysts have cut their full year earnings outlook over the past 60 days, and the consensus estimate has fallen 46 cents to $13.72 per share; Adobe’s earnings are expected to grow about 10% for fiscal 2022, with sales up over 13% for the same period.

Shares of Adobe are down 13.8% over the last six months, due in large part to the broad-based tech sell-off.

A report from UBS in January added to the stock’s woes.

The bank cut its rating on Adobe, downgraded shares to neutral because of “2022 growth concerns.” UBS said it was “disappointed” with Adobe’s growth figures for the past few quarters, and it’s worried that "front-office/marketing tech spend" got "pulled-forward in 2020/2021." If that’s the case, it means that Adobe’s growth in those years was artificially inflated, and borrowed from expansion that would have otherwise happened in 2022.

These warnings from Wall Street, coupled with a tough trading environment for high-flying growth stocks, have led investors to reevaluate ADBE. After its recent slide, shares now trade at a forward P/E of 46.7X.

Adobe shares may continue to experience even more wild ups and downs as tech stocks continue to sell off, so potential investors should proceed with caution.

Additional content:

Will North America Bolster Ford's (F - Free Report) Q4 Earnings?

Ford’s North America market — which accounts for the bulk of total automotive revenues — is likely to have fueled fourth-quarter earnings. The U.S. auto giant is set to release quarterly results on Feb 3, before market open.

(Also read: Is Ford Poised to Keep Earnings Beat Streak Alive in Q4?)

Q3 Highlights of Ford’s North America Market

In the last reported quarter, wholesale unit volumes in the North American segment declined 16% from the year-earlier quarter to 546,000 units. Revenues in the North American segment also dropped 5% year on year to $24 billion. Consequently, EBIT totaled $2,423 million, lower than the $3,202 million recorded in the corresponding quarter of 2020. The global chip deficit, high commodity prices, a tight labor market and logistical challenges impaired the results.

Solid Vehicle Sales to Drive North America Market in Q4

Selling 508,451 vehicles, Ford emerged as the best-selling automaker in the United States in fourth-quarter 2021, marking a 26.8% sequential increase versus the overall industry’s decline of roughly 3%.

While sales of the namesake brand came in at 487,484 units in the fourth-quarter 2021, up from 383,805 vehicles in third-quarter 2021, the same from the Lincoln brand increased to 20,967 units from 17,038 units in the last reported quarter.

In addition, total truck sales for the quarter came in at 268,379 units, up from 229,738 units recorded in third-quarter 2021. Sales of America’s best-selling truck, Ford F-Series, totaled 191,173 units, up from 172,799 vehicles in the last reported quarter.

Sales for SUVs totaled 228,499 units, marking an uptick from 161,571 units sold during the third quarter. Ford witnessed sequential growth in sales of all major SUV brands including Escape, Edge, Expedition, Bronco and Bronco Sport. Sales of Mustang Mach-E — Ford’s popular electric offering — totaled 8,285, rising 40% sequentially.

The demand for passenger cars also rose to 11,573 units for the three months ended Dec 31 from 9,534 units in the third quarter, majorly due to higher sales of the Mustang model.

The Zacks Consensus Estimate for wholesale volumes in North America is pegged at 576,000 units, implying an uptick from 546,000 in third-quarter 2021. Consequently, the consensus mark for revenues in North America is $25.7 billion, pointing to an improvement from $24 billion recorded in the third quarter.

We believe the projected sequential revenue and deliveries growth in the North America market is likely to aid Ford’s fourth-quarter results.

Ford’s Overall Earnings & Revenue Projections for Q3

The Zacks Consensus Estimate for Ford’s fourth-quarter earnings and revenues is pegged at 43 cents a share and $35.02 billion, respectively.

Investors should note that our proven model does not conclusively predict an earnings beat for Ford this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is not the case here. Ford currently carries a Zacks Rank #2 and has an Earnings ESP of 0.00%. 

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks with a Favorable Combination

Here are a few stocks in the auto sector that are worth considering, as these have the right combination of elements to come up with an earnings beat this time around:

O'Reilly Automotive has an Earnings ESP of +1.72% and a Zacks Rank #3. The stock is set to report fourth-quarter 2021 earnings on Feb 9.

The Zacks Consensus Estimate for O’Reilly’s to-be-reported quarter’s earnings and revenues is pegged at $5.96 per share and $3.07 billion, respectively. ORLY surpassed earnings estimates in the trailing four quarters, with the average being 16.8%.

BorgWarner has an Earnings ESP of +3.92% and a Zacks Rank #3. The stock is set to report fourth-quarter 2021 earnings on Feb 15.

The Zacks Consensus Estimate for BorgWarner’s to-be-reported quarter’s earnings and revenues is pegged at 74 cents per share and $3.46 billion, respectively. BWA surpassed earnings estimates in the trailing four quarters, with the average being 30.9%

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

7 Best Stocks for the Next 30 Days

Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."

Since 1988, the full list has beaten the market more than 2X over with an average gain of +25.3% per year. So be sure to give these hand-picked 7 your immediate attention. 

See them now >>

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