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Why Dillard's (DDS) Stock Looks like a Top Pick After Earnings
Dillard’s (DDS - Free Report) has continued to separate itself from other regional department store retailers such as Macy’s (M - Free Report) and Kohl's (KSS - Free Report) due to its immense probability. This is strongly tied to Dillard’s business model of owning its store locations rather than leasing like many other regional department store chains including Macy’s and Kohl’s.
To that point, Dillard’s flexed its cost-efficient business operations after impressively surpassing its fourth quarter top and bottom line expectations on Monday.
Impressive Q4 Results
Showing its robust bottom line has remained intact Dillard’s posted Q4 earnings of $13.69 per share which easily surpassed the Zacks Consensus of $11.59 a share by 18%. On the top line, Q4 sales of $2.12 billion were virtually flat from the prior year quarter but topped estimates by 2%.
The earnings beat was very impressive as it showed Dillard’s is still excelling in what CEO William Dillard stated is a weak consumer environment with Q4 EPS at a whopping $14.50 per share a year ago. Furthermore, Dillard’s has now surpassed earnings expectations for 15 consecutive quarters posting an average earnings surprise of 42.81% in its last four quarterly reports.
Image Source: Zacks Investment Research
Attractive P/E Valuation
Dillard’s niche as a highly profitable retailer of fashion apparel and home furnishings is hard to overlook with DDS shares trading at a very reasonable 13.3X forward earnings multiple with EPS estimates likely to rise over the next few weeks.
Although Dillard’s bottom line is Lightyear's ahead of most retailers in general including the likes of Target (TGT - Free Report) and Costco Wholesale (COST - Free Report) this is still near its Zacks Retail-Regional Department Stores Industry average of 10.3X which includes Macy’s and Kohl’s. Even better, Dillard’s stock is trading at a nice discount to the S&P 500’s 21.2X and well below its decade-long high of 45.8X while being closer to the median of 12.1X.
Image Source: Zacks Investment Research
Low Debt
With Dillard’s EPS expected to be over an astonishing $30 per share for the foreseeable future the company’s low debt-to-capital ratio (D/C) further illustrates why it has been able to sustain its lucrative profitability.
Taking into account debt including mortgages and long-term leases, Dillard’s has a very low D/C percentage of 22.33% in correlation with owning its stores compared to its industry average of 47.78% with Macy’s at 43.24% and Kohl’s at 57.56%. It's also noteworthy that Dillard’s D/C ratio is impressively below the optimum level of 40% with the S&P 500’s average at 45.49%.
Image Source: Zacks Investment Research
Stellar Price Performance
Dillard’s stock is up a respectable +5% year to date with DDS shares rising +19% in the last year and now climbing +376% over the last three years to largely outperform its Zacks Subindustry and the broader indexes.
Image Source: Zacks Investment Research
Bottom Line
Dillard’s stock currently sports a Zacks Rank #2 (Buy) following its much better-than-expected Q4 results but it would be no surprise if its stellar price performance continues considering its attractive valuation and efficient business operations.
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Why Dillard's (DDS) Stock Looks like a Top Pick After Earnings
Dillard’s (DDS - Free Report) has continued to separate itself from other regional department store retailers such as Macy’s (M - Free Report) and Kohl's (KSS - Free Report) due to its immense probability. This is strongly tied to Dillard’s business model of owning its store locations rather than leasing like many other regional department store chains including Macy’s and Kohl’s.
To that point, Dillard’s flexed its cost-efficient business operations after impressively surpassing its fourth quarter top and bottom line expectations on Monday.
Impressive Q4 Results
Showing its robust bottom line has remained intact Dillard’s posted Q4 earnings of $13.69 per share which easily surpassed the Zacks Consensus of $11.59 a share by 18%. On the top line, Q4 sales of $2.12 billion were virtually flat from the prior year quarter but topped estimates by 2%.
The earnings beat was very impressive as it showed Dillard’s is still excelling in what CEO William Dillard stated is a weak consumer environment with Q4 EPS at a whopping $14.50 per share a year ago. Furthermore, Dillard’s has now surpassed earnings expectations for 15 consecutive quarters posting an average earnings surprise of 42.81% in its last four quarterly reports.
Image Source: Zacks Investment Research
Attractive P/E Valuation
Dillard’s niche as a highly profitable retailer of fashion apparel and home furnishings is hard to overlook with DDS shares trading at a very reasonable 13.3X forward earnings multiple with EPS estimates likely to rise over the next few weeks.
Although Dillard’s bottom line is Lightyear's ahead of most retailers in general including the likes of Target (TGT - Free Report) and Costco Wholesale (COST - Free Report) this is still near its Zacks Retail-Regional Department Stores Industry average of 10.3X which includes Macy’s and Kohl’s. Even better, Dillard’s stock is trading at a nice discount to the S&P 500’s 21.2X and well below its decade-long high of 45.8X while being closer to the median of 12.1X.
Image Source: Zacks Investment Research
Low Debt
With Dillard’s EPS expected to be over an astonishing $30 per share for the foreseeable future the company’s low debt-to-capital ratio (D/C) further illustrates why it has been able to sustain its lucrative profitability.
Taking into account debt including mortgages and long-term leases, Dillard’s has a very low D/C percentage of 22.33% in correlation with owning its stores compared to its industry average of 47.78% with Macy’s at 43.24% and Kohl’s at 57.56%. It's also noteworthy that Dillard’s D/C ratio is impressively below the optimum level of 40% with the S&P 500’s average at 45.49%.
Image Source: Zacks Investment Research
Stellar Price Performance
Dillard’s stock is up a respectable +5% year to date with DDS shares rising +19% in the last year and now climbing +376% over the last three years to largely outperform its Zacks Subindustry and the broader indexes.
Image Source: Zacks Investment Research
Bottom Line
Dillard’s stock currently sports a Zacks Rank #2 (Buy) following its much better-than-expected Q4 results but it would be no surprise if its stellar price performance continues considering its attractive valuation and efficient business operations.