Dick's Sporting Goods Stock Drops on Beat-And-Raise Quarter

outside of Dick's Sporting Goods store in Yonkers, New York

(Image credit: Bing Guan/Bloomberg via Getty Images)

Dick’s Sporting Goods (DKS) stock is trading deep in negative territory Wednesday even after the athletic apparel and equipment retailer beat top- and bottom-line expectations for its second quarter and raised its full-year outlook.

In the 13 weeks ended August 3, Dick's Sporting Goods reported revenue of $3.5 billion, an increase of 7.8% year-over-year, driven by a 4.5% jump in comparable-store sales. Its earnings per share (EPS) were up 55% from the year-ago period to $4.37.

The quarterly results were "powered by our compelling omni-channel athlete experience, differentiated product assortment, best-in-class teammate experience and our ability to create deep engagement with the Dick's brand," said Dick's Sporting Goods CEO Lauren Hobart in a statement. "Our Q2 comparable-store sales were driven by growth in average ticket and transactions, and with growth in sales, gross margin expansion and SG&A leverage, we delivered earnings-before-taxes margin of nearly 14%."

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The results beat analysts' expectations. Wall Street was anticipating revenue of $3.44 billion and earnings of $3.83 per share, according to CNBC.

"Because of our strong Q2 performance and the confidence we have in our business, we are again raising our full-year outlook," Hobart said.

The company now anticipates comparable-store sales growth in the range of 2.5% to 3.5% and earnings per share of $13.55 to $13.90. This compares with its previous outlook of comparable-store sales growth between 2% to 3% and EPS in the range of $13.35 to $13.75.

Dick's added that it continues to anticipate revenue will arrive between $13.1 billion to $13.2 billion.

However, the midpoints of Dick's outlook for the full fiscal year failed to meet analysts' high expectations for the year. Specifically, Wall Street is forecasting revenue of $13.24 billion and earnings of $13.79 per share.

Is Dick's Sporting Goods stock a buy, sell or hold?

Even with today's drop, Dick's Sporting Goods is up more than 47% for the year-to-date. And Wall Street is bullish on the consumer discretionary stock.

According to S&P Global Market Intelligence, the average analyst target price for DKS stock is $239.08, representing implied upside of roughly 10% to current levels. Meanwhile, the consensus recommendation is a Buy.

However, not everyone is so upbeat toward Dick's Sporting Goods. Financial services firm Wedbush, for instance, has a Neutral rating (equivalent to a Hold) and a $250 price target on DKS stock.

While Wedbush analyst Seth Basham anticipated a beat-and-raise quarter from the sporting goods retailer, he says high investor expectations, decelerating consumer spending trends, and an elevated valuation keeps him on the sidelines at the moment.

Joey Solitro is a freelance financial journalist at Kiplinger with more than a decade of experience. A longtime equity analyst, Joey has covered a range of industries for media outlets including The Motley Fool, Seeking Alpha, Market Realist, and TipRanks. Joey holds a bachelor's degree in business administration.