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Dick's (DKS) Down 8% Since Last Earnings Report: Can It Rebound?

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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 8% 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 drivers.

DICK'S Sporting Q1 Earnings and Sales Beat Estimates

DICK'S Sporting posted impressive first-quarter fiscal 2022 results, wherein both the top and the bottom line surpassed the Zacks Consensus Estimate. However, both metrics declined year over year. On a two-year basis, DKS witnessed growth, driven by strength in its core strategies.

Quarter in Detail

For the fiscal first quarter, adjusted earnings were $2.85 per share, down 25% from the prior-year figure of $3.79. This can be attributable to drab sales and dismal gross margins for the reported quarter. However, the figure surpassed the Zacks Consensus Estimate of $2.43 per share.

Net sales of $2,700 million declined 7.5% year over year but surpassed the Zacks Consensus Estimate of $2,634 million. However, net sales advanced 41% from the fourth-quarter fiscal 2019 reading on sales normalization in certain categories.

Consolidated same-store sales (comps) declined 8.4% from comps growth of 117.1%.

The gross margin contracted 83 basis points (bps) year over year to 36.5% for the quarter under review due to higher supply-chain-related costs and rising fixed occupancy costs, which were somewhat offset by improved merchandise margins. SG&A expenses of 22.8%, as a percentage of sales, contracted 195 bps year over year due to weak sales.

Financial Aspects

The company ended the reported quarter with cash and cash equivalents of $2,251.3 million, no borrowings under the $1.6-billion revolving credit facility and a total stockholders' equity of $2,194.6 million. Total inventory rose 40% year over year as of Apr 30, 2022.

In the reported quarter, total capital expenditure amounted to $73.8 million. DICK’S Sporting still projects capital expenditure of $400-$425 million on a gross basis for fiscal 2022.

DKS approved its quarterly dividend of 48.75 cents per share on common stock and Class B common stock, which is likely to be paid out on Jun 24 to its shareholders of record as of Jun 10. DICK’S Sporting paid out more than $46.1 million in the form of dividends and repurchased shares worth $42 million in the quarter. Management intends to buy back at least $300 million of shares in fiscal 2022.

Guidance

Management slashed its fiscal 2022 view to reflect the ongoing macroeconomic environment, supply-chain conditions and the current geopolitical situation. DKS envisions adjusted earnings of $9.15-$11.70 for fiscal 2022, comparing unfavorably with the prior view of $11.70-$13.10. Also, comps are anticipated to decline 8-2%, down from the earlier guided view of a decline of 4% to flat. However, management expects sales to grow roughly 35% on a two-year basis.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

The consensus estimate has shifted -14.66% due to these changes.

VGM Scores

At this time, Dick's has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Dick's has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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