Why Dick's Sporting Goods (DKS) Is Up Today

Tickers in this article: DKS

NEW YORK (TheStreet) -- Dick's Sporting Goods gained 1.7% to $51.99 Monday after the sporting goods retailer issues an upside guidance for its fourth quarter.

The now retailer says it expects earnings of $1.10 to $1.11 a share. Capital IQ Consensus Estimate calls for $1.06 a share for the quarter. Consolidated same store sales, adjusted for a shifted calendar due to a 53rd week in fiscal 2013, increased by about 7% in the quarter, or 6% on an unshifted basis. The company's guidance from Nov. 19 expected same store sales to increase 3% to $5, or 2% to 3% on an unshifted basis.

Dick's Sporting Goods also issued a downside guidance for full year 2015 that's sees earnings of between $3.03 and $3.08 a share, compared to analyst estimates of $3.09.

"Even with the cautious consumer environment and a shorter and promotional holiday season, we generated sales well above our original expectations, maintained merchandise margin levels consistent with last year and leveraged SG&A," chairman and CEO Edward W. Stack said in a press release.

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TheStreet Ratings team rates DICKS SPORTING GOODS INC as a "buy" with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate DICKS SPORTING GOODS INC (DKS) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 7.0%. Since the same quarter one year prior, revenues slightly increased by 6.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • DICKS SPORTING GOODS INC reported flat earnings per share in the most recent quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, DICKS SPORTING GOODS INC increased its bottom line by earning $2.31 versus $2.10 in the prior year. This year, the market expects an improvement in earnings ($2.65 versus $2.31).
  • DKS's debt-to-equity ratio is very low at 0.08 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.16 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Specialty Retail industry and the overall market on the basis of return on equity, DICKS SPORTING GOODS INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • In its most recent trading session, DKS has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.