Editor's note: The headline to this article has been corrected.
Although the stock markets closed at record levels Tuesday, they did so on the back of only incremental rises in the various key indexes. The day probably won't go down as a memorable one on the markets for most investors in top stocks.
One big reason for this is that few companies reported earnings that blew far past analyst expectations. Somewhat unexpectedly, two that did operate in the retail sector -- a corner of the economy that has really had its struggles lately. Here's a closer look at this winning pair.
Dick's Sporting Goods
Many investors and analysts expected a good quarter from Dick's Sporting Goods (NYSE:DKS), but not this good. The grizzled athletics retailer delivered a superb Q3 earnings report that lifted its stock by almost 19% on the day.
For the quarter, Dick's net sales came in at $1.96 billion for year-over-year growth of 5.6%. That was on the back of same-store sales that advanced at a 6% clip. Collectively, analysts tracking the stock had estimated only $1.91 billion on the top line.
The same-store sales figure was more than double the average analyst projection of 2.9%, and was the highest quarterly growth rate since 2013.
On the bottom line, Dick's netted a non-GAAP (adjusted) net profit of just under $45 million, or $0.52 per share. That number was far above the $0.38 per share modeled by prognosticators.
Better, Dick's raised its fiscal 2019 same-store sales and net profit guidance for the third time this year. The company is now forecasting same-store sales will improve by 2.5% to 3%, with adjusted per-share net income coming in at $3.50 to $3.60.
The company is improving on a series of fronts. All three of its key product categories -- hardlines, footwear, and apparel -- saw significant growth, as did the average customer spend.
The excellent Q3 showing portends well for the holiday season, which, it almost goes without saying, is a critical time for any retailer. Dick's has very good forward momentum, although a nearly 20% blast in stock price should raise concerns that the stock is becoming overvalued.
On the other end of the shopping mall is electronics retailer Best Buy (NYSE:BBY), whose stock saw a rise of almost 10% in its price for reasons similar to Dick's.
Best Buy's Q3 of fiscal 2020 results show that the company took in $9.76 billion in revenue, up 1.8% year over year. Same-store sales improved by 1.7%.
Under GAAP standards, net profit for the period was 6% higher at $293 million. On an adjusted, per-share basis, this shook out to $1.13, up from Q3 2019's $0.93.
Both headline numbers topped the average analyst estimates. Those pundits were anticipating $9.74 billion for revenue and $1.04 in per-share adjusted net profit.
Best Buy updated its guidance for the entirety of fiscal 2020. It now believes it will earn revenue of $43.2 billion to $43.6 billion on same-store sales of 1% to 2%, up from its previous prediction of 0.7% to 1%. Adjusted earnings per share should land at $5.81 to $5.91; that betters the former estimated range of $5.60 to $5.75.
Numerous product categories saw increases in sales during Q3. Among these were tablet computers and appliances. Best Buy's services segment posted a very robust rise of nearly 13%, which is encouraging, as it's an important component of the company's growth strategy.
Americans can't seem to get enough electronics. This, plus Best Buy management's ability to devote resources to the right product categories, makes the company look like it's well primed for future growth. Even with today's price jump, then, the stock still feels like a buy.