A month has gone by since the last earnings report for Dick's Sporting Goods (DKS). Shares have added about 0.2% in that time frame, outperforming the S&P 500.

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

DICK'S Sporting Tops on Q2 Earnings & Sales, Ups View

DICK'S Sporting posted better-than-expected second-quarter fiscal 2021 results, wherein both top and bottom lines improved year over year. Results gained from customer demand across all categories and enhanced omni-channel capabilities. Management raised its fiscal 2021 view.

Q2 in Detail

In the fiscal second quarter, adjusted earnings were $5.08 per share, up 58% from the prior-year quarter figure of $3.21. The figure surpassed the Zacks Consensus Estimate of $2.80 per share. The uptick can be attributable to solid sales and improved gross margins in the reported quarter. Adjusted earnings also skyrocketed 303% from second-quarter fiscal 2019.

Net sales of $3,275 million grew 21% year over year and beat the Zacks Consensus Estimate of $2,834 million. The uptick can be attributable to improved store sales and a robust online show. Net sales rose 45% from second-quarter fiscal 2019.

Consolidated same-store sales (comps) advanced 19.2% compared with comps growth of 20.7% and 3.2% in second-quarter fiscal 2020 and second-quarter fiscal 2019, respectively. This can be attributable to double-digit sales growth in its core categories — hardlines, apparel and footwear — along with higher average ticket and transactions.

E-commerce sales surged 111% from second-quarter fiscal 2019, while it declined 28% year over year. E-commerce accounted for nearly 18% of net sales in the reported quarter, up from 12% in second-quarter fiscal 2019 but down roughly 30% from second-quarter fiscal 2020. The online unit benefitted from services like in-store and curbside pickup, reduced promotions, faster delivery and a better checkout experience. Its mobile platform also remains a key growth driver, accounting for more than 50% of online sales for the first half of 2021.

Gross margin expanded 538 basis points (bps) year over year to 40%, driven by higher sales and improved merchandise margins. Adjusted EBT expanded 562 bps year over year to 20.28% in the reported quarter. SG&A expenses of 19.6%, as a percentage of sales, declined 46 bps year over year and 351 bps from second-quarter fiscal 2019. The company incurred nearly $15 million of COVID-related safety costs for the six months ended Jul 31, 2021.

Financial Aspects

DICK'S Sporting ended the reported quarter with cash and cash equivalents of $2,236.7 million, no borrowings under its $1.9-billion revolving credit facility, and total stockholders' equity of $3,005.4 million. Total inventory rose 7.2% year over year as of Jul 31, 2021. In the quarter under review, total capital expenditure amounted to $167.7 million. The company now projects capital expenditure of $370-$395 million, on a gross basis, for fiscal 2021.

The company has hiked its quarterly dividend to 43.75 cents per share on common stock and Class B common stock, which is likely to be paid out on Sep 24 of shareholder record as of Sep 10. It repurchased 0.8 million shares worth $75.8 million. Following this, the company has roughly $879 million under its existing authorization, which is valid till June 2024. It also projects share repurchase of at least $400 million for fiscal 2021.

FY21 Guidance

Driven by the impressive quarterly results along with a solid start to the fiscal third quarter and the back-to-school season, management raised its fiscal 2021 view. Fiscal 2021 sales are expected to be $11,520-$11,720 million, up from the previously mentioned $10,515-$10,806 million. Same-store sales are likely to grow 18-20%, up from the earlier stated 8-11%.

Adjusted earnings are now envisioned to be $12.45-$12.95, which reflect a sharp improvement from $8-$8.70 per share mentioned earlier. Adjusted EBT is likely to be $1.61-$1.67, up from the previously stated $1.02-$1.11. Adjusted EBT margin is expected to be 14%. Gross margin is estimated to be higher than fiscal 2020 and fiscal 2019 on the back of improved merchandise margins and lower fixed expenses. SG&A expenses are likely to decline from the figures reported in fiscal 2020 and 2019 due to higher expected sales. However, freight expenses are expected to persist through the rest of fiscal 2021.

The company is on track with the plans to open six DICK'S Sporting Goods stores and eight specialty concept stores this year. It anticipates relocating 11 DICK'S Sporting Goods stores and converting two Field & Stream stores into Public Lands stores.

Business Developments

In second-quarter fiscal 2021, the company converted around 25 additional DICK's stores to premium full-service footwear and added 50 elevated soccer shops. Its first two DICK's House of Sport stores in Rochester, NY, and Knoxville, TN, are performing well, with positive customer response.

Management remains optimistic about the early performance of VRST, its new premium men's apparel brand. Being one of the leading premium golf retailers in the world, DICK’S Sporting has rolled out the TrackMan technology and revealed plans to expand this in all stores in the fiscal third quarter. The company is also set to launch its first Public Lands store in Pittsburgh and expects Public Lands to serve as a key growth driver in the near term.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 64.6% due to these changes.

VGM Scores

At this time, Dick's has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile 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 trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Dick's has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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