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Bear of the Day: Dick's Sporting Goods (DKS)

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DICK'S Sporting Goods Inc. (DKS - Free Report) is a significant omnichannel sporting goods retailer that offers athletic shoes, apparel, accessories, and a broad selection of outdoor and athletic equipment for team sports, fitness, camping, fishing, tennis, golf, water sports, and more.

Analysts have slashed their earnings expectations as of late, pushing the stock down into an unfavorable Zacks Rank #5 (Strong Sell).

Zacks Investment Research
Image Source: Zacks Investment Research

Let’s take a closer look at a few other characteristics of DKS.

DICK’S Sporting Goods

The company’s latest quarterly report disappointed investors, with DKS falling short of the Zacks Consensus EPS Estimate by 25% and delivering a fractional revenue surprise. Earnings declined 24% year-over-year, whereas revenue climbed 3.6% from the same period last year.

The company’s profitability picture was massively impacted by elevated inventory shrink, a phenomenon DKS says many retailers are currently facing. And to top it off, DKS lowered its FY23 EPS outlook, causing shares to plummet post-earnings.

Zacks Investment Research
Image Source: Zacks Investment Research

Shares now yield 3.5% annually following the sell-off, with a payout ratio sitting at 34% of the company’s earnings. It’s worth noting that the company has been committed to increasingly rewarding its shareholders, sporting a 25% five-year annualized dividend growth rate.

In addition, DKS shares presently trade at a 9.4X forward earnings multiple (F1), below the 10.8X five-year median and the respective Zacks industry average. Shares have traded as high as 12.5X in 2023.

Zacks Investment Research
Image Source: Zacks Investment Research

Bottom Line

Negative earnings estimate revisions from analysts and a recent negative quarterly print paint a challenging picture for the company’s shares in the near term.

DICK’S Sporting Goods (DKS - Free Report) is a Zacks Rank #5 (Strong Sell), indicating that analysts have taken a bearish stance on the company’s earnings outlook.

For those seeking strong stocks, a great idea would be to focus on stocks carrying a Zacks Rank #1 (Strong Buy) or a Zacks Rank #2 (Buy) – these stocks sport a notably stronger earnings outlook paired with the potential to deliver explosive gains in the near term.


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