A month has gone by since the last earnings report for Dick's Sporting Goods (DKS Quick QuoteDKS - Free Report) . Shares have lost about 6.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Dick's due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

DICK'S Sporting Q4 Earnings & Sales Beat on High Demand

DICK'S Sporting posted better-than-expected top and bottom lines for fourth-quarter fiscal 2022. The company has been benefiting from the compelling assortment and structural transformation in recent years.

Adjusted earnings were $2.93 per share in the fiscal fourth quarter, down 20% from the prior-year figure of $3.64. The metric reflects a 122% surge on a three-year basis. The decline can be attributed to a dismal gross margin and higher operating expenses in the reported quarter. However, adjusted earnings beat the Zacks Consensus Estimate of $2.86 per share and our estimate of $2.66.

Net sales of $3,597 million improved 7.3% year over year and surpassed the Zacks Consensus Estimate of $3,408 million and our estimate of $3,333.1 million. Also, net sales advanced 41% from fourth-quarter fiscal 2019, driven by strength in its core strategies.

Consolidated comparable store sales (comps) grew 5.3%, down from comps growth of 6.6% in the year-ago quarter. Also, DKS witnessed comp growth of 19.3% and 5.3% on a 2-year stack basis and a 3-year basis, respectively, in the fiscal fourth quarter.

The adjusted gross margin contracted 514 basis points year over year to 32.4% in the fiscal fourth quarter due to weak merchandise margin, which partly offset lower supply-chain costs.

In the fiscal fourth quarter, the adjusted SG&A expense rate of 22.9% expanded 48 bps year over year. SG&A expenses, in dollar terms, increased 8.9% to $823.7 million.

Financial Aspects

DICK’S Sporting ended the fiscal fourth quarter with cash and cash equivalents of $1,924 million, and no borrowings under the $1.6-billion revolving credit. Total inventory improved 23% year over year to $2,831 million as of Jan 28, 2023.

The company paid out dividends of $163 million and repurchased shares worth $427 million in fiscal 2022. It has $1.4 billion remaining under its existing share repurchase authorization. In the fiscal fourth quarter, DICK’s Sporting declared a quarterly dividend of 48.75 cents per share on common stock and class B common stock.

On Mar 6, 2023, DKS’s board approved a quarterly dividend of $1.00 per share on the company's common stock and class B common stock, payable Mar 31, 2023, to stockholders of record at the close of business on Mar 17, 2023. The dividend represents a hike of 105% from the previous quarterly dividend.

As of Jan 28, 2023, net capital expenditure amounted to $328 million. DICK’S Sporting projects capital expenditure of
$670-$720 million on a gross basis and $550-$600 million on a net basis for fiscal 2023.

Guidance

Driven by the impressive quarterly results, the company issued its fiscal 2023 view. For fiscal 2023, the company expects comps to be flat to up 2%. It envisions adjusted earnings of $12.9-$13.8 per share, including 20 cents for the 53rd week. The adjusted earnings view assumes 88 million shares outstanding as of fiscal 2023. Also, the effective tax rate is likely to be 22%.

At the mid-point, the EBT margin is predicted to be 11.7%, driven by better gross margins. This includes potential improvement in merchandise margin and lower supply-chain costs. The company expects the first-quarter fiscal 2023 gross margin to witness sequential improvement but is likely to be down year over year due to lower merchandise margins partly offset by reduced freight costs.

Gross and merchandise margins are expected to sequentially improve throughout the year. SG&A expenses are anticipated to deleverage due to investments to fund its growth strategy. Interest expenses are forecast to be $55 million, suggesting a $40 million year-over-year decline due to the inducement charges incurred in 2022 related to convertible debt and related interest savings.

Store Update

In the reported quarter, the company announced the exit of the Field & Stream brand. Consequently, DKS closed 12 of the remaining 17 stores for conversion into eight DICK'S House of Sport stores and four expanded DICK'S Sporting Goods stores.

For fiscal 2023, the company is expected to open nine DICK'S House of Sport locations, eight of which are existing DICK'S and Field & Stream combo store conversions, whereas one is a relocation. It also announced the construction of more than 10 DICK'S House of Sport locations that will open throughout 2024. Management revealed plans to expand the footprint of its Golf Galaxy business through the Golf Galaxy Performance Center and convert temporary value chain stores to permanent locations. Also, it is likely to convert more than 100 stores to premium full-service footwear.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

The consensus estimate has shifted 13.75% due to these changes.

VGM Scores

At this time, Dick's has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Dick's has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.