Shares of Dick’s Sporting Goods (DKS ) have climbed over 22% this year to double the S&P 500’s comeback. The question is can this impressive run continue and should investors consider buying DKS stock before it reports its fourth-quarter financial results on Tuesday?
Dick’s saw its sales at existing stores and websites sink 3.9% last quarter. The sporting goods retailer experienced a downturn in its hunting and electronics department, which executives said accounted for roughly half of the overall decline. Some have pinned the department’s weakness on the company’s decision last February to stop selling assault-style guns and guns and ammunition to people under 21 years old. But other companies, including Walmart (WMT ) , also stopped selling to people under 21, without a significant downturn.
Aside from its hunting department, Dick’s faces much larger headwinds in the Amazon (AMZN ) age. Industry giants Nike (NKE ) , Adidas (ADDYY ) , and even Under Armour (UAA ) have all jumped further into their own e-commerce and direct-to-consumer businesses. Meanwhile, the likes of Lululemon (LULU ) and other trendy athleisure brands have expanded without any presence in traditional wholesale sporting goods retail shops.
With that said, Foot Locker (FL ) is coming off an impressive fourth quarter, which could be a good sign for Dick’s. Foot Locker’s comps surged 9.7% to blow away Wall Street estimates, as customers spent more heavily on sneakers.
Moving on, our current Zacks Consensus Estimate calls for DKS’ Q4 revenues to fall by 6.91% to hit $2.48 billion during the vital holiday shopping period. Meanwhile, the company’s comparable sales are projected to sink by 3.8%, based on our NFM estimate.
At the bottom end of the income statement, Dick’s adjusted quarterly earnings are expected to tumble 12% to $1.07 a share. Investors should also note that the retailer has seen no changes to its Q4 earnings estimate over the last 90 days, which means analyst sentiment has remained the same.
We can also see that DKS stock has dramatically underperformed its industry over the last five years. In fact, Dick’s stock is down nearly 30% during this stretch, compared to the broader industry’s 80% average climb. However, as we mentioned at the top, shares Dick’s have surged to start the year and are now up over 20% in the last 12 months, compared to the Nonfood Retail-Wholesale Market’s sideways movement.
DKS stock has also popped roughly 8% over the last month and hovered at $38.25 a share through mid-morning trading Thursday. This marked around a 6% downturn from its recently-reached 52-week high of $40.87 per share. On top of this solid momentum, Dick’s stock is trading at 11.2X forward 12-month Zacks Consensus EPS estimates, which represents a major discount compared to its industry’s 26X and the S&P’s 16.5X.
Dick’s is a Zack Rank #3 (Hold) at the moment that sports a “B” grade for Value in our Style Scores system. The company is also a dividend payer that just raised its upcoming quarterly payout by 22%.
With all that said, Dick’s could be a stock to consider buying heading into earnings. But its larger industry has changed quickly and DKS stock has already climbed in 2019. This means Dick’s might need to blow away Wall Street estimates in a key retail category—like Foot Locker—in order to continue its recent run of success.
Dick’s is scheduled to release its fourth quarter financial results before the opening bell on Tuesday, March 12. So, make sure to head back to Zacks for a full breakdown of the sporting goods retailer’s actual results following the release.
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