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Why Is Dick's (DKS) Down 0.1% Since Last Earnings Report?

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A month has gone by since the last earnings report for Dick's Sporting Goods (DKS - Free Report) . Shares have lost about 0.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Dick's due for a breakout? 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 Q1 Earnings & Sales Estimates

DICK'S Sporting posted better-than-expected first-quarter fiscal 2021 results. Further, both top and bottom lines improved year over year. Results gained from favorable customer demand, particularly in golf, outdoor activities, home fitness and active lifestyle categories. Also, a solid product portfolio, advanced technologies and omnichannel capabilities contributed to quarterly growth.

Going forward, the company remains optimistic about fiscal 2021. As a result, management raised fiscal 2021 guidance.

Q1 in Detail

In the fiscal first quarter, adjusted earnings came in at $3.79 per share against the prior-year quarter’s loss of $1.71. The figure also surpassed the Zacks Consensus Estimate of $1.04 per share. The uptick can be attributable to solid sales and improved gross margins in the reported quarter.

Net sales of $2,918.7 million skyrocketed 119% year over year and exceeded the Zacks Consensus Estimate of $2,215 million. This uptick can be attributable to improved store sales and a robust online show. Notably, consolidated same-store sales (comps) surged 115% year over year. E-commerce sales advanced 14% year over year, representing nearly 20% of net sales in the reported quarter compared with 39% in the prior-year quarter.

Gross margin expanded significantly to 37.3%, up from 16.5% reported in the last-year quarter. Meanwhile, SG&A expenses, as a percentage of sales, contracted 940 bps year over year to 20.8%. This is inclusive of $13 million of safety expenses associated with COVID-19.

Financial Aspects

DICK'S Sporting ended the quarter with cash and cash equivalents of $1,858.7 million, no borrowings under its $1.9-billion revolving credit facility and total stockholders' equity of $2,598.7 million. Further, total inventory declined 4% year over year as of May 1, 2021.

In the quarter under review, total capital expenditure amounted to $71.1 million. The metric is now projected to be $370-$395 million for fiscal 2021.

Also, the company has approved a quarterly dividend of 36.25 cents per share on common stock and Class B common stock, which is likely to be paid out on Jun 25 as of shareholders’ record on Jun 11. Moreover, it repurchased 1.03 million shares worth $76.8 million. Following this, the company has roughly $954 million under its existing authorization, which is valid till June 2024.

FY21 Guidance

Driven by the solid fiscal first-quarter results, management raised its fiscal 2021 view. Fiscal 2021 sales are expected to be $10,515-$10,806 million, up from the prior view of $9,544-$9,935 million. Same store sales are likely to be up 8-11% as compared to the earlier guided view of down 2% to up 2%. Moreover, adjusted earnings are now envisioned to be $8-$8.70 per share, which reflects a sharp improvement from $4.4-$5.2 per share guided earlier. Further, it still projects share repurchase of at least $200 million. Also, it noted that COVID-related costs are expected to decline from the fiscal second quarter.

Apart from these, the company plans to open six new DICK'S Sporting Goods stores and eight specialty concept stores this year. Also, it anticipates relocating 11 DICK'S Sporting Goods stores along with converting two Field & Stream stores into Public Lands stores.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 49.3% due to these changes.

VGM Scores

Currently, Dick's has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. 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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