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Why Is Dick's (DKS) Up 3.4% Since Last Earnings Report?
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It has been about a month since the last earnings report for Dick's Sporting Goods (DKS - Free Report) . Shares have added about 3.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Dick's due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
DICK'S Sporting Beats Earnings & Sales Estimates in Q2
DICK'S Sporting Goods posted better-than-expected second-quarter fiscal 2020 results, wherein both top and bottom lines improved year over year. Moreover, management did not provide any fiscal 2020 view citing unprecedented impacts of COVID-19. Further, it noted that all its stores have resumed operations from June-end.
Q2 in Detail
In the fiscal first quarter, DICK'S Sporting reported adjusted earnings of $3.21 per share, up more than two-folds from $1.26 in the prior-year quarter. The figure also surpassed the Zacks Consensus Estimate of $1.24 per share.
Net sales of $2,713.4 million rose 20.1% year over year and exceeded the Zacks Consensus Estimate of $2,508 million. Consolidated same-store sales (comps) grew 20.7%, driven by higher transactions and rise in average ticket to the tune of 2.8% and 17.9%, respectively. Also, solid performance in all core categories, including hardlines, apparel and footwear, contributed to comps growth. Apart from these, the company witnessed double-digit growth in store comps in June and July.
Going ahead, healthy consumer demand that drove comps in the quarter under review remains intact and has continued momentum in the third quarter. However, it witnessed sluggishness in key back-to-school categories as sports events and schools remain suspended due to the ongoing COVID-19 situation. For the first three weeks of the third quarter, comps grew 11%.
E-commerce sales surged 194% year over year, which was nearly 30% of net sales in the reported quarter compared with 12% in the prior-year quarter. Encouragingly, management announced a pay premium of 15% for this year.
Gross margin expanded roughly 456 basis points (bps) to 34.5% in the quarter under review. This was due to a 325-bp rise in merchandise margins and a 204-bp leverage on occupancy costs.
Meanwhile, SG&A expenses, as a percentage of sales, contracted 305 bps year over year to 20% due to sturdy sales growth. This is inclusive of $32 million of extra compensation and $12 million of safety expenses associated with the COVID-19 crisis.
Financial Aspects
DICK'S Sporting ended fiscal 2020 with cash and cash equivalents of $1,061.1 million, no outstanding borrowings under its $1.9-billion revolving credit facility and total stockholders' equity of $1,930.3 million. Moreover, it issued 3.25% senior notes worth $575 million, adding an extra $500 million to the cash balance. Further, total inventory declined 12.2% year over year as of Aug 1, 2020. In the reported quarter, total capital expenditure amounted to $12.5 million.
Dividend Payments and Share Repurchases
Although the company did not repurchase any shares in the reported quarter, it has resumed its dividend program lately. It approved a dividend of 31.25 cents per share on its Common Stock and Class B Common Stock, which has been paid out on Jun 30.
Moreover, management declared a quarterly dividend of 31.25 cents to be payable on Sep 25, to shareholders on record as of Sep 11, 2020. Apart from these, DICK’S Sporting is likely to resume share repurchases under its existing share repurchase program of $1 billion.
Looking Ahead
The company has launched its back-to-school campaign at the end of the fiscal second quarter, wherein the product offerings are in accordance with the ongoing scenario. Moving on, the company highlighted that it expects to incur $50 million of COVID-19-related costs in each quarter of fiscal 2020.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 182.76% due to these changes.
VGM Scores
At this time, Dick's has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Dick's has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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Why Is Dick's (DKS) Up 3.4% Since Last Earnings Report?
It has been about a month since the last earnings report for Dick's Sporting Goods (DKS - Free Report) . Shares have added about 3.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Dick's due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
DICK'S Sporting Beats Earnings & Sales Estimates in Q2
DICK'S Sporting Goods posted better-than-expected second-quarter fiscal 2020 results, wherein both top and bottom lines improved year over year. Moreover, management did not provide any fiscal 2020 view citing unprecedented impacts of COVID-19. Further, it noted that all its stores have resumed operations from June-end.
Q2 in Detail
In the fiscal first quarter, DICK'S Sporting reported adjusted earnings of $3.21 per share, up more than two-folds from $1.26 in the prior-year quarter. The figure also surpassed the Zacks Consensus Estimate of $1.24 per share.
Net sales of $2,713.4 million rose 20.1% year over year and exceeded the Zacks Consensus Estimate of $2,508 million. Consolidated same-store sales (comps) grew 20.7%, driven by higher transactions and rise in average ticket to the tune of 2.8% and 17.9%, respectively. Also, solid performance in all core categories, including hardlines, apparel and footwear, contributed to comps growth. Apart from these, the company witnessed double-digit growth in store comps in June and July.
Going ahead, healthy consumer demand that drove comps in the quarter under review remains intact and has continued momentum in the third quarter. However, it witnessed sluggishness in key back-to-school categories as sports events and schools remain suspended due to the ongoing COVID-19 situation. For the first three weeks of the third quarter, comps grew 11%.
E-commerce sales surged 194% year over year, which was nearly 30% of net sales in the reported quarter compared with 12% in the prior-year quarter. Encouragingly, management announced a pay premium of 15% for this year.
Gross margin expanded roughly 456 basis points (bps) to 34.5% in the quarter under review. This was due to a 325-bp rise in merchandise margins and a 204-bp leverage on occupancy costs.
Meanwhile, SG&A expenses, as a percentage of sales, contracted 305 bps year over year to 20% due to sturdy sales growth. This is inclusive of $32 million of extra compensation and $12 million of safety expenses associated with the COVID-19 crisis.
Financial Aspects
DICK'S Sporting ended fiscal 2020 with cash and cash equivalents of $1,061.1 million, no outstanding borrowings under its $1.9-billion revolving credit facility and total stockholders' equity of $1,930.3 million. Moreover, it issued 3.25% senior notes worth $575 million, adding an extra $500 million to the cash balance. Further, total inventory declined 12.2% year over year as of Aug 1, 2020. In the reported quarter, total capital expenditure amounted to $12.5 million.
Dividend Payments and Share Repurchases
Although the company did not repurchase any shares in the reported quarter, it has resumed its dividend program lately. It approved a dividend of 31.25 cents per share on its Common Stock and Class B Common Stock, which has been paid out on Jun 30.
Moreover, management declared a quarterly dividend of 31.25 cents to be payable on Sep 25, to shareholders on record as of Sep 11, 2020. Apart from these, DICK’S Sporting is likely to resume share repurchases under its existing share repurchase program of $1 billion.
Looking Ahead
The company has launched its back-to-school campaign at the end of the fiscal second quarter, wherein the product offerings are in accordance with the ongoing scenario. Moving on, the company highlighted that it expects to incur $50 million of COVID-19-related costs in each quarter of fiscal 2020.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 182.76% due to these changes.
VGM Scores
At this time, Dick's has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Dick's has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.