Dick’s Sporting Goods Knocks Quarterly Earnings Out of Ballpark

DICK’S Sporting Goods, Inc. (DKS) jumped 15.68% Wednesday after the sport’s equipment and apparel retailer smashed Wall Street’s earnings and revenues forecasts on the back of surging digital sales.

The company reported second-quarter (Q2) adjusted earnings of $3.21 per share, with the figure coming in well above analysts’ expectation of $1.30 a share and increasing 155% from last year’s profit of $1.24 per share. Sales of $2.71 billion ballooned  20% from a year ago and came in 8.21% ahead of the Street expectation.

As of Aug. 27, 2020, DICK’s stock has a market capitalization of $4.82 billion, issues a 2.68% dividend yield, and is up a whopping 57% over the last three months.

Steep Hike in Online Sales

The company’s digital sales, including curbside pickup orders, grew 194% during the quarter as consumers visited the website to purchase hiking apparel, kayaks, weights, and activewear gear to stay fit during the pandemic. “During this pandemic, the importance of health and fitness has accelerated and participation in socially distant, outdoor activities has increased,” CEO Ed Stack told investors during the conference call, per CNBC. “There has also been a greater shift toward athletic and active lifestyle products with people spending more time working and exercising at home,” he added.

Wall Street View

Analysts remain mostly bullish on the stock as stay-at-home fitness trends look likely to continue into the fall. There’s also a consensus the sporting goods retail giant could gain market share, given that many of its major brick-and-mortar competitors have filed for bankruptcy. The stock receives 10 ‘Buy’ ratings, 14 ‘Hold’ ratings, and 1 ‘Sell’ rating. Price targets range from $71 to $34, with the median Street target sitting at $52. Currently, the shares trade at $53.99.

Technical Outlook and Trading Tactics

The DICK’s share price broke above key resistance at $48 on heavy volume Wednesday, indicating institutional buying interest behind the move. Furthermore, earlier this week, the moving average convergence divergence (MACD) indicator crossed above its trigger line to generate a buy signal. Additionally, a golden cross signal last month suggests further upside.

Those who play the breakout should look for a retest the all-time high (ATH) at $62.88, with a stop-loss order placed underneath yesterday’s low at $50.47. The trade offers a risk/reward ratio of around 1:2.5, assuming a fill at Wednesday’s $53.99 closing price. ($8.89 profit per share vs. $3.51 risk per share)