Dick’s Sporting Goods (DKS) is a Pennsylvania-based sporting goods chain store. Its portfolio of goods includes athletic apparel, sportswear, footwear, fitness equipment, golf equipment, skateboards, and more. It offers branded apparel from major labels like Nike (NKE), Adidas, Slazenger, Under Armour (UAA), and Yeti (YETI), to name a few. Founded in 1948, Dick's has more than 800 stores under its umbrella, including Golf Galaxy, Public Lands, and other branded stores, along with the Gamechanger mobile app.
Dick’s stock has surged 38.2% this year, including an incredible 92% gain over the last 6 months. That far surpasses the S&P 500 Index ($SPX), which has gained 23% over the past year.
What's Driving DKS?
The sports retail giant posted better-than-expected earnings on March 14, which caused its stock to pop 15.47% in a single day. The company said revenue rose 2.4% to $3.88 billion for the quarter beating estimates of $3.80 billion. Adjusted earnings ramped up 31% to $3.85 per share, outpacing Wall Street’s $3.35 expectation. The rise in earnings was powered by an improvement in gross margin to 34.4% from 32.2% in the prior quarter.
On the full-year front, revenue increased 5% to $12.98 billion, while EPS increased 7% to $12.91.
As for the fiscal 2024 outlook, Dick's expects earnings in the range of $12.85 to $13.25 per share, with net sales of $13.0 billion to $13.13 billion. That forecast accounts for a 1% to 2% increase in comparable store sales.
The company also announced a dividend hike of 10%, bringing its quarterly payout to $1.10 per share. The stock now yields 2.12%, and DKS has raised its dividend consistently for the past 9 years. With a payout ratio around 30%, the dividend is well-covered.
What’s Next for DKS?
Since the upside surprise on earnings, analysts all around Wall Street have been upgrading their ratings and price target for DKS stock.
DA Davidson analyst Michael Baker reiterated a “Buy” rating on the stock, with the newly hiked price target of $250 indicating an upside potential of 23%. Goldman Sachs raised their price target for the retailer as well, from $157 to $247, while maintaining a “Buy” rating.
Oppenheimer analyst Brian Nagel raised DKS' target from $190 to $240 and reiterated an “Outperform” rating. In a note to clients, Nagel said Dick’s Sporting Goods is “a standout among leading retailers,” citing its steady traffic and increasing market share.
Overall, Dick's Sporting Goods has a consensus “Moderate Buy” rating from 19 analysts, with 8 opting for the “Strong Buy” rating, 1 going for a “Moderate Buy” rating, and the remaining 10 calling DKS a “Hold.”
While the stock has room to run about 9.9% higher to its mean price target of $223.26, the Street-high price target of $260 implies expected upside of nearly 28% from Friday's close.
On the date of publication, Ruchi Gupta did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
