Earnings Preview: Dicks Sporting Goods

Dicks Sporting Goods (DKS) reports before the market opens tomorrow on the 9th. In general, analysts expect them to easily surpass earnings as the cold weather drove high sales in the higher margin outerwear category. My main concern is that analysts seem completely fixated on the outerwear business that clearly benefits from snow and cold weather, but what about the golf division. The unusual snow in Texas and cold weather in Florida would have an impact on the golf division.

Regardless, we're very bullish on DKS long term. They trade at 19x the $1.32 estimate for this year. Not overly cheap but assuming they beat estimates and as the focus moves toward the 2011 (Jan 2012) estimates I'd expect a much higher stock price. Just don't expect a big ramp on beating estimates tomorrow.

• Reported earnings of outwear makers like VF Corp (VFC.N) and Columbia Sportswear Co (COLM.O) as well as suppliers like Under Armor Inc (UA.N) and Nike Inc (NKE.N) suggest heightened demand for cold-weather gear, analysts said.

• "I think the sell-through was strong for outerwear," SunTrust Robinson & Humphrey analyst David Magee said.

  Analysts on average expect the Dick's Sporting to earn 55 cents a share on revenue of $1.29 billion, while Hibbett is expected to earn 31 cents a share, on revenue of $154.4 million, according to Thomson Reuters I/B/E/S.

  SmartEstimates from Thomson Reuters StarMine, which lends more weight to recent estimates from top-ranking analysts, puts the average expectation for earnings marginally higher than the consensus for both companies.

  However, Stephens Inc analyst Rick Nelson said Wall Street profit estimates "are conservative and beatable," as the cold-weather sales could be even higher than people are expecting.

  Concerns over extreme weather conditions dampening sales in some markets seem to have eased.

  "The storms that we thought would prevent shopping didn't prevent it as much," Needham and Co analyst Sean McGowan, who is expecting an upside to his profit estimates for the companies, said.

Technically the chart is interesting as DKS pushes towards a triple top. Obviously a break above the $26 level because very bullish. Of course a breakdown from this level especially one taking the stock below the 20.50ema becomes very bearish. Its in a make or break situation.