Dick's Sporting Goods (NYSE:DKS) has been on an upward track for the last two years. The company's latest earnings report reveals why. Beats for both earnings and revenue gave the stock an almost five percent boost in premarket trading, yesterday.
Dick's Sporting Goods deals in a range of athletic and sporting equipment, from golf clubs to workout clothes. The company's stock price has better than doubled over the last year. (See Dick's Sporting Goods stock charts on TipRanks)
The company turned in adjusted earnings per share of $5.08 per share against Refinitiv's consensus figure of $2.80. It also posted $3.27 billion in revenue against an expected $2.85 billion.
Net income for the second quarter was up nearly 80% against the same time last year, coming in at $495.5 million or around $4.53 per share. The year-ago figures came in at $276.8 million, around $3.12 per share. The company also succeeded against pre-pandemic figures, with sales in the second quarter of 2021 coming in 45% higher than those seen in 2019's second quarter.
Further, the company announced plans to ramp up capital spending. These plans include a 21% increase in its quarterly dividend and a special dividend of $5.50 per share. The company also announced plans to double its stock buyback program. This move puts the total available for buybacks to at least $400 million.
Wall Street's Take
Wall Street analyst consensus calls Dick's Sporting Goods a “Moderate Buy”. The company currently has 16 analysts covering it, with seven calling it a “Buy," nine calling it a “Hold," and one calling it a “Sell.”
Price targets run in a wide range. The average Dick's Sporting Goods price target currently sits at $115.73 per share, with a high target of $150 and a low of $88. The company closed at $129.60 yesterday, suggesting a downside of 10.7%.
Going Gun-free
In late 2019, following the Marjory Douglas Stoneman High shootings in Florida, Dick's Sporting Goods decided it would no longer sell firearms and ammunition in its stores. The company previously enjoyed a boost from the hunting market. Many considered surrendering that market akin to leaving money on the table.
Using the last two years of steadily-climbing share prices as a guide, the company's decision to give up one market allowed it to surge in several others instead. The company's customer base appears to be responding positively, and is making up for the lost sales in guns and ammunition with a wide range of sales increases elsewhere.
Concluding Views
Dick's Sporting Goods is certainly seeing improvements thanks to a reopened America. However, the rise of new coronavirus variants may put this development at risk. Further, the already-positive sales may hurt future sales. Customers' interest in buying more equipment after just having bought it may be waning.
Still, with two years of nearly-continuous gains on its side, improved dividends, and plans to raise the stock price via an enhanced buyback strategy, Dick's Sporting Goods stock represents an attractive buy, even at these pricing levels.
Disclosure: At the time of publication, Steve Anderson did not have a position in any of the securities mentioned in this article.
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