Earnings Preview: Dick’s Sporting

Dick’s Sporting Goods Inc. (DKS) is scheduled to release its first-quarter 2011 results on Tuesday, May 17, 2011. The Zacks Consensus Estimate is 29 cents a share for the first quarter of fiscal 2011. This represents a year-over-year estimated growth of 31.8%.

Fourth Quarter Performance

Dick’s Sporting Goods posted strong fourth quarter 2010 results, ended January 29, 2011, on the heels of higher sales and improved margins. Quarterly earnings climbed to 76 cents a share from the year-ago level of 56 cents a share and comfortably outpaced its earnings guidance in the range of 69 to 71 cents. Dick’s also surpassed the Zacks Consensus Estimate of 72 cents. On a GAAP basis, the company reported earnings per share of 71 cents.

A 9.4% increase in consolidated comparable-store sales (comps) and opening of new stores aided the 13.6% year-over-year increase in total revenue, which climbed to $1,518.9 million. Total revenues beat the Zacks Consensus Estimate of $1,450.0 million.

The comps growth was driven by an 8.6% rise in Dick’s Sporting Goods store sales, a 2.2% increase in Golf Galaxy store sales, coupled with a 36.3% growth in e-commerce.

Earnings Guidance

For first quarter 2011, Dick’s expects earnings per share to be between 26 cents and 28 cents and comps to rise between 4% and 5%. The Zacks Consensus Estimate for the quarter is pegged at 27 cents a share.

For full year 2011, management expects earnings in the range of $1.89 to $1.91 per share, while comps are expected to increase 3.0%. The Zacks Consensus Estimate for fiscal 2011 earnings stands at $1.59.

Agreement of Analysts

Over the last 30 days, only 1 out of 23 analysts moved the estimate upward with no movement downward for the first quarter of fiscal 2011. This implies that most of the analysts are neutral on the outlook and do not foresee any upward or downward pressure on the result. A similar placid trend has been noticed for fiscal 2011, with just 1 analyst increasing the estimate with no downward movement by any analyst over the last 30 days.

In the last 7 days, no movement has been made in estimates by any analyst for the first quarter of fiscal 2011 and for fiscal 2011.

Magnitude of Estimate Revisions

With no significant effect of estimate revisions in the last 30 days, the consensus estimates, for the first quarter of fiscal 2011 and fiscal 2011, have remained stagnant at 29 cents and $1.29 per share, respectively.

Earnings Surprise

Considering earnings surprises, the stock has been steady over the last four quarters, with positive surprises ranging between a low of 4.9% and a high of 57.1%. The average remained positive at 24.3%.

The upside potential for the estimate in the first quarter 2011, essentially a proxy for future earnings surprises, currently stands at 3.5%.

Our Recommendation

We have maintained our long-term ‘Neutral’ recommendation on Dick. On the positive, the company has a Zacks #2 Rank, implying a short-term ‘Buy’ rating on the stock.

Pittsburgh-based Dick’s Sporting Goods is a full-line sporting goods retailer offering a broad assortment of brand name sporting goods equipment, apparel and footwear in a specialty store environment.

Dick’s remains the dominant player in the industry with significant store expansion and potential share gain opportunities in the U.S. We remain optimistic about the company’s competitive position, quality of management and consistency of earnings growth.

However, the sporting goods market is highly competitive in nature and Dick’s failure to compete effectively in terms of price, quality or product will hamper its growth potential. The company faces competition from Foot Locker Inc. (FL) and others.

FOOT LOCKER INC (FL): Free Stock Analysis Report

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