Dick's Sporting (DKS) Well Poised For Growth: Time To Buy

Dick's Sporting Goods, Inc. (NYSE:DKS) has been gaining from its long-term growth plans, omnichannel initiatives, healthy financials and impressive earnings history. Due to these factors, the company has outperformed the Retail-Miscellaneous/Diversified industry with an average year-to-date return of 76.1% compared with 12.3% for the latter.

Starting with its growth endeavors, the company has been aggressively expanding its store base and eCommerce capabilities to achieve its long-term revenue target of $8.7–$9.0 billion by the end of fiscal 2017. To achieve this target, DICK’S Sporting intends to increase its retail store count to 735–750 by the end of fiscal 2017.

Further, the company remains focused on exploring every opportunity to drive sales growth and expand the eCommerce business. We believe that the company’s strategic measures of consolidating store base and the use of technology to provide better services will enhance its relationship with present customers apart from attracting new ones.

Moreover, these measures are likely to promote DICK’S Sporting’s products effectively thereby boosting its top and bottom lines.

Coming to DICK’s Sporting’s financials, the company continues to efficiently utilize cash flows to accomplish its long-term growth targets as well as fund share repurchases and pay quarterly dividends. The company’s regular buybacks and dividend payments not only reflect its confidence in future prospects, but also shed light on its commitment toward shareholders.

Backed by these factors, the Zacks Rank #2 (Buy) company posted an earnings beat in the third quarter of fiscal 2016. The third quarter earnings also gained from robust comps growth, gross margin expansion and tough inventory management. Further, with the declaration of bankruptcy by major rivals like the Sports Authority, DICK’S Sporting is expected to benefit its ongoing performance.

Based on the robust results and expectations of market share gains in the future, the company’s management raised its fiscal 2016 view, following which the Zacks Consensus Estimate for fiscal 2016 has trended upwards to $3.09 per share, from $3.05 per share, over the past 30 days.

However, the company’s guidance for the fourth quarter remained bleak, hinting at a weaker-than-expected holiday season. Also, the company remains susceptible to macroeconomic challenges and stiff competition. However the aforementioned growth drivers, along with the company’s strategy of offering exclusive branded merchandise are likely help it sustain its solid momentum.

Other Stocks to Consider

Other well-ranked stocks include ULTA Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA) and The Children's Place, Inc. (NASDAQ:PLCE) , each carrying a Zacks Rank #1 (Strong Buy), and Big 5 Sporting Goods Corp. (NASDAQ:BGFV) with a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

ULTA Salon’s solid long-term earnings per share (EPS) growth rate of 19.5% and positive estimate revisions over the past 30 days help it stand strong in the industry. Further, the company flaunts a spectacular earnings history.

Children's Place, in the trailing four quarters has an average positive earnings surprise of 36.3%. The stock, with a long-term growth rate of 10.3%, has seen positive estimate revisions in the last 30 days.

Big 5 Sporting has an average positive earnings surprise of 4.8% in the trailing four quarters. The stock, with a long-term growth rate of 12%, has seen positive estimate revisions in the last 30 days.

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