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Popular Sports Retailer Surges to All-Time High on Earnings Beat

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Well-known sports retailer Dick’s Sporting Goods (DKS - Free Report) reported fiscal fourth-quarter earnings results on Tuesday morning that beat expectations, pointing to a sales bump from the holiday season despite cautious consumers that remain focused on inflation.

DKS announced quarterly results of $2.93/share, beating the Zacks Consensus Estimate of $2.86/share. Revenues of $3.6 billion for the quarter ended January 2023 also exceeded projections by 5.5%. Dick’s Sporting Goods has surpassed earnings estimates in each of the prior four quarters, with an average surprise of 10.11%.

The big shock, however, was the same-store sales growth, which increased 5.3% in Q4 – more than double the 2.1% median projection. According to a DKS spokesperson, athletic apparel, footwear, and team sports products drove the solid quarterly results.

As supply chain and industrywide inventory struggles continue to evaporate, Dick’s is heading into the New Year with renewed optimism. The company expects full-year EPS in a range of $12.90 - $13.80/share, well ahead of current analysts’ estimates. Shares were up nearly 10% Tuesday morning.

DKS has been a bright spot in what is otherwise a difficult stock market environment. Shares bottomed out all the way back in May of last year, well before the major indices. A steady pattern of higher lows and higher highs – along with a string of recent earnings beats – has contributed to a more than 100% gain off the lows, hitting an all-time high in the process.

Zacks Investment Research
Image Source: Zacks Investment Research

Dick’s Sporting Goods is ranked favorably by our Zacks Style Score Value category with a best-possible ‘A’ rating. This indicates that DKS stock is likely to continue to move higher on favorable valuation metrics. Despite the recent impressive stock performance, DKS shares remain undervalued at an 11.03 forward P/E.

DKS is part of the Zacks Retail – Miscellaneous industry group, which currently ranks in the top 33% out of more than 250 Zacks Ranked Industries. Because this group is ranked in the top half of all industries, we expect it to outperform the market over the next 3 to 6 months. Also note the favorable metrics for this industry group below:

Zacks Investment Research
Image Source: Zacks Investment Research

Historical research studies suggest that approximately half of a stock’s price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1. It’s no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.

In addition, DKS currently pays a $1.95 (1.48%) dividend, providing investors with income in addition to potential price appreciation.

Make sure to keep an eye on DKS as the stock looks primed to continue its outperformance.


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