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A full-line sporting goods retailer, Dick's Sporting Goods Inc. (DKS - Analyst Report) hit the bull’s eye with its fourth quarter and fiscal 2011 earnings, which met the Zacks Consensus Estimate. The company’s results kept afloat mainly on robust sales performance benefiting from store expansions and better margins.
The overall analyst sentiment for Dick’s remains positive, driven by the company’s consistent performance and a strong outlook. The current Zacks Consensus Estimate for first-quarter and fiscal 2012 are 38 cents and $2.41 per share, respectively, which is at the higher end of the company’s recent earnings guidance range.
Fourth Quarter Synopsis
Dick's Sporting Goods Inc. delivered fourth quarter and fiscal 2011 results, in line with the Zacks Consensus Estimate. The results came ahead of the year-ago comparisons, mainly driven by increased sales resulting from opening of new stores and improved margins.
Dick’s’ fourth-quarter 2011 adjusted earnings jumped 16% to 88 cents a share from the year-ago level of 76 cents a share, meeting the high-end of the company’s recently revised guidance range of 87 - 88 cents per share. Dick’s also fully met the Zacks Consensus Estimate of 88 cents per share.
In fiscal 2011, the company reported adjusted earnings of $2.02 per share, up 24% from last year and at the higher-end of the company’s guidance range of $2.01 to $2.02 per share. Annual earnings also met the Zacks Consensus Estimate of $2.02 a share.
An increase of 0.1% in consolidated comparable-store sales (comps) and opening of new stores aided an increase of 6.1% year over year in net sales to $1,611.6 million during the quarter. However, total revenue fell marginally short of the Zacks Consensus Estimate of $1,612.0 million.
Net sales at Dick’s spiked 7% to $5,211.8 million for fiscal 2011, mainly driven by a 2.0% consolidated comps growth and opening of new stores. Fiscal year revenue slightly missed the Zacks Consensus Estimate of $5,217.0 million.
The 0.1% comps growth in the fourth quarter was in line with the company’s January 2012 guidance and was driven by a 9.0% increase in Golf Galaxy store sales and a 52.0% growth in the e-commerce business, offset by a 2.5% rise in Dick's Sporting Goods store sales.
(Read our full coverage on this earnings report: Dick’s Meets Bottom Line)
Agreement of Estimate Revisions
Following the company’s recent quarter performance, estimate revision trend mostly remained in the positive direction with majority of analysts raising their estimates and only a few pulling down estimates. For the first quarter of 2012, 15 out of 22 analysts positively revised their estimates in the last 30 days whereas none of the analysts lowered their estimates in the same period.
For fiscal 2012, 15 out of 23 analysts moved up their estimates in the last 30 days while 2 analysts slashed the same. For fiscal 2013, estimate revisions in the last 30 days include 6 analysts raising estimates while none moving in the opposite direction.
However, there were no positive or negative revisions by analysts in the last 7 days for the first quarter of 2012, fiscal 2012 and 2013.
Magnitude of Estimate Revisions
The recent estimate revision trends point to an overall positive bias on the part of the analysts, which is reflected in the form of higher earnings estimates for the next quarter, fiscal 2012 and fiscal 2013 over the last 30 days. Estimates for the three reporting periods, however, remained stable over the last 7 days with no estimate revisions.
Driven by the positive revisions for first quarter estimate and the absence of any negative movement, the Zacks Consensus Estimate for the first quarter moved up by 2 cents in the last 30 days. The current first quarter estimate stands at 38 cents per share.
Majority positive estimate revisions for fiscal 2012 were only slightly offset by the fewer negative revisions in the last 30 days, driving estimates to move up by 3 cents to $2.41 per share. In the last 30 days, fiscal 2013 estimates rose by 6 cents to $2.76 per share on account of only upward estimate revisions and no downward revisions.
Pittsburgh-based Dick's Sporting Goods remains the dominant player in the industry with significant store expansion and potential share gain opportunities in the U.S. We remain optimistic about the company’s competitive position and consistency of earnings growth.
Further, we remain impressed by the company’s strategy of alternatively investing in key strategic areas including new stores, eCommerce, inventory management systems and private brands. In 2012, the company expects to spend a gross of $241 million toward capital expenditures while it expects net spending to reach $190 million.
We also remain impressed by the company’s solid balance sheet, which is characterized by strong cash position and no outstanding borrowing under its credit facility. On the other hand, investors remain encouraged by Dick’s practice of returning cash to shareholders in the form of dividend payouts and share repurchases.
However, the sporting goods market is highly competitive in nature and Dick’s failure to compete effectively in terms of price, quality or product will thwart its growth potential. The company faces stiff competition from Foot Locker Inc. (FL - Snapshot Report) and Wal-Mart Stores Inc. (WMT - Analyst Report). Moreover, a weak economy will likely continue to weigh on the company’s profitability in the long term.
Dick's Sporting Goods currently has a short-term Zacks #2 Rank (Buy). We maintain our long-term ‘Neutral’ recommendation on the stock.
About Earnings Estimate Scorecard
As a PhD from MIT, Len Zacks proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at http://www.zacks.com/education
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