Dick’s (DKS) Down 1.8% Since Last Earnings Report: Could There Be a Rebound?

It’s been about a month since Dick’s Sporting Goods (DKS) last reported earnings. Shares have lost about 1.8% in that time, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Dick’s ready for a breakout? Before we dive into how investors and analysts have reacted lately, 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’s Q1 earnings and sales beat estimates

DICK’S Sporting reported impressive first-quarter fiscal 2024 results, with top and bottom lines beating the Zacks Consensus Estimate. Sales also increased year-over-year. Despite the challenging macroeconomic environment, the company is benefiting from its strategic efforts and continued market share gains. It is well on track to streamline its operations to improve its overall cost structure.

Q1 in detail

Adjusted earnings per share were $3.30, down 3% from $3.40 in the year-ago period. However, net income beat the Zacks Consensus Estimate of $2.94.

Net sales of $3,018 million improved 6.2% year-over-year and topped consensus estimates of $2,943 million. The increase can be attributed to comparable store sales (comps) and healthy transaction growth.

Consolidated comparisons increased 5.3% year over year. Moreover, this figure exceeded our growth estimates by 2.8%. This was due to higher transactions and average tickets.

Gross profit increased 6.5% year over year to USD 1,095.3 million and exceeded our estimate of USD 1,056.1 million. Meanwhile, margin increased by 10 basis points (bps) year-over-year to 36.3%.

In the fiscal first quarter, the SG&A expense rate of 24.6% increased 20 basis points year over year. SG&A expenses in dollar terms increased 7.1% to $743.4 million, exceeding our estimate of $719.2 million.

Financial aspects

DICK’S Sporting ended the first fiscal quarter with cash and cash equivalents of $1.6 billion and no borrowings under its revolving credit facility. Total inventories increased 6.7% year-over-year to $3.2 billion as of May 4, 2024.

The Company repurchased 0.5 million shares under the share repurchase program for $113.6 million, of which $5.0 million was paid after the quarter. As of May 4, $665.9 million remained under authorization.

On May 28, the company’s board of directors approved and declared a quarterly cash dividend of $1.10 per share of common stock and Class B common stock. The dividend is payable on June 28 to shareholders of record as of June 14, 2024.

As of May 4, net capital expenditures were $126.2 million. DICK’S Sporting forecasts capital expenditures of $900 million gross and $800 million net for fiscal 2024.

History continues

Conductivity

Management raised its guidance for fiscal year 2024. It expects net sales to be between $13.1 billion and $13.2 billion.

DKS forecasts adjusted earnings per share in the range of $13.35-$13.75, compared to our estimate of $13.14 and the prior guidance range of $12.85-$13.25. The adjusted earnings approach assumes that 83 million shares will be issued in fiscal year 2024. The effective tax rate is expected to be 24%.

How have estimates changed since then?

Investors have witnessed an upward trend in estimate revisions over the last month.

The consensus estimate changed by 6.87% as a result of these changes.

VGM results

At the moment, Dick’s has a weak Growth Score of D, but its Momentum Score is doing much better at A. Following that exact same trajectory, the stock was given an A rating on the Value side, putting it in the top 20% for this investment strategy.

Overall, the stock has a Composite VGM Score of B. If you’re not focused on a single strategy, this rating should interest you.

Perspectives

Estimates for the stock are trending higher overall, and the scale of these revisions looks promising. It’s no surprise that Dick’s has a Zacks Rank #2 (Buy). We expect above-average stock returns over the next few months.

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