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Can DICK'S Sporting (DKS) Retain Earnings Beat Trend in Q4?

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DICK’S Sporting Goods Inc. (DKS - Free Report) is slated to report fourth-quarter fiscal 2018 results on Mar 12, before the opening bell. The company reported a positive earnings surprise of 44.4% in the last reported quarter. Further, its earnings surpassed the Zacks Consensus Estimate for five straight quarters. The average four-quarter beat was 25.5%.

For the to-be-reported quarter, the Zacks Consensus Estimate for earnings is pegged at $1.07 per share, reflecting a decline of 12.3% year over year. However, earnings estimates have remained unchanged over the past 30 days. Meanwhile, the Zacks Consensus Estimate for revenues stands at $2,480 million, down 6.9% from the prior-year quarter. Let’s see how things are shaping up ahead of the upcoming release.

Factors at Play

Positive earnings trend due to omni-channel expansion and a unique merchandising strategy is favoring DICK’S Sporting. Robust growth in private brands, outdoor and athletic apparel, and solid e-commerce operations is also driving earnings. Notably, solid execution of merchandising strategies has been boosting merchandise margins, which in turn led to gross margin expansion.

The company’s merchandising strategy (announced in fourth-quarter fiscal 2016) is all about optimizing inventory in order to make shelves available for popular and private label brands. The company is keen on investing in the supply chain to improve in-stock levels as well as the speed and reliability of online delivery. These investments should improve customer satisfaction and inventory turnover while continuing to boost merchandise margin rates.

Further, the company remains on track to build the best omni-channel experience for athletes by strengthening its store network and expanding e-commerce presence. Notably, e-commerce penetration improved to about 12% of net sales in the fiscal third quarter, with e-commerce sales growth of 16%. As part of its long-term plan, the company intends to make significant investments in e-commerce, technology, store payroll, Team Sports HQ and private brands. These endeavors are likely to enrich customer experience, and augment top and bottom lines in the fiscal fourth quarter and beyond.

Backed by these positive trends, management envisions earnings per share of $3.15-$3.25 for fiscal 2018, up from $3.01 earned in fiscal 2017. The Zacks Consensus Estimate for earnings in fiscal 2018 is pegged at $3.24, which is within the company’s guidance range.

Furthermore, the DICK’S Sporting stock has displayed strong momentum in the past month, which suggests a positive sentiment ahead of earnings. The stock surged 4.4%, outperforming the industry’s 2.6% growth.

 



However, DICK’S Sporting has been witnessing soft comps, owing to persistent weakness in its hunting and electronics categories. Soft comps are hurting the company’s top line, which lagged estimates in the last two quarters. While management has made changes in its hunting business, which is expected to improve performance, electronics business is likely to weigh on comps in fiscal 2018.

A Look at the Zacks Model

Our proven model does not conclusively show that DICK’S Sporting is likely to beat earnings estimates in fourth-quarter fiscal 2018. This is because a stock needs to have — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

DICK’S Sporting currently carries a Zacks Rank #3 but the company’s Earnings ESP of 0.00% makes surprise prediction difficult.

Stocks Poised to Beat Earnings Estimates

Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Zumiez Inc. (ZUMZ - Free Report) has an Earnings ESP of +0.45% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Abercrombie & Fitch Company (ANF - Free Report) has an Earnings ESP of +2.28% and a Zacks Rank #2.

The Kroger Co. (KR - Free Report) has an Earnings ESP of +3.42% and a Zacks Rank #3.

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