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Will DICK’S Sporting’s (DKS) Q3 Earnings Lag Estimates?

Zacks

DICK’S Sporting Goods Inc. DKS is slated to report third-quarter fiscal 2017 results on Nov 14, before the opening bell. In the previous quarter, the company reported negative earnings surprise of 4%. Notably, , the company’s earnings have surpassed the Zacks Consensus Estimate in two of the trailing four quarters, with an average beat of 3.2%.

What to Expect?

The big question facing investors is whether this sporting goods retailer will be able to deliver a positive earnings surprise in the quarter to be reported. The current Zacks Consensus Estimate for the quarter under review is 26 cents, reflecting a year-over-year decline of 45.3%. We note that the Zacks Consensus Estimate for the quarter has been stable in the past 30 days. Analysts polled by Zacks expect revenues of $1.89 billion, reflecting 4.4% growth from the prior-year quarter.

Dick's Sporting Goods Inc Price and EPS Surprise

Dick's Sporting Goods Inc Price and EPS Surprise | Dick's Sporting Goods Inc Quote


However, we note that the stock has underperformed the industry in the past three months. The company’s shares have declined 25.7%, while the industry has dropped 8%.



Factors at Play

Dick's Sporting has been reeling under major sports industry woes of late, mostly related to increased competition and heightened promotional activities. The company is trying all means to boost omni-channel presence to counter the competition from Amazon.com Inc. (AMZN). In fact, it recently re-launched its website to improve customer experience. While these endeavors bode well for the long term, costs associated with these investments remain a deterrent for the company’s margin. Further, margins are bearing the brunt of intense promotional activities undertaken by the company to thrive amid the mounting competition.

Additionally, the company is battling a soft hunting business, where comparable-store sales (comps) declined double-digits in the preceding quarter. Further, management expects the hunting business to witness tough times in the remainder of fiscal 2017. Despite its strong efforts to capture displaced market share from liquidation of rival firms, the company anticipates the hunting category to remain drab.

Not only this, management anticipates all aforementioned barriers to persist in fiscal 2017, which compelled it to curtail fiscal 2017 earnings per share and comps forecasts.

While DICK’s Sporting remains committed toward its merchandise plan and strategies of boosting digital operations and exploiting industry consolidation, these plans may take a while to offset the prevailing glitches.

Given the near-term hurdles, we remain a little skeptical of the outcome in the to-be reported quarter.

What Does the Zacks Model Unveil?

Our proven model does not conclusively show that DICK’S Sporting is likely to beat on earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

DICK’S Sporting has an Earnings ESP of -2.86% and a Zacks Rank #4 (Sell), which lowers the chances of delivering surprise. Note that we caution against Sell-rated stocks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

The Home Depot Inc. HD has an Earnings ESP of +0.40% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Ross Stores Inc. ROST has an Earnings ESP of +0.27% and a Zacks Rank #2.

Signet Jewelers Limited SIG has an Earnings ESP of +69.09% and a Zacks Rank #2.

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