It’s “Game On!” For Academy Sports And Outdoors

March 29, 2022

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By MarketBeat. Originally published at ValueWalk.

Academy Sports And Outdoors Is On The Rebound

Academy Sports and Outdoors Inc (NASDAQ:ASO) Q4 results prove that America’s love of the outdoors is as strong as ever. The company’s results not only beat on the top and bottom lines but the guidance is good as well. In this light, the stock is not only grossly undervalued at only 5X its earnings consensus but a budding dividend growth stock as well. The company recently initiated a quarterly dividend that amounts to about 0.75% in yield. It is backed up by a fortress balance sheet, ample free cash flow, and a positive earnings growth trajectory so we have every expectation to see the distribution grow over time.

Q4 2021 hedge fund letters, conferences and more

Academy Sports And Outdoors Hits A Homerun

Academy Sports + Outdoors capped off a record-setting year with a record-setting 4th quarter. The company reported $1.81 billion in net revenue for a company record that beat the Marketbeat.com consensus estimate by 225 basis points. The gains were driven by a combination of realized selling price, a reduced promotional environment, and a mix that resulted in higher ticket counts and check averages. On a comp basis, sales are also up 13.1% and are up 32% in the 2-year stack making the 10th quarter of positive YOY growth.

Moving down to the margins, margin growth was also recorded and for many of the same reasons. The gross margin grew by 110 basis points on higher merchandise margins and mix offset by higher freight costs. On the bottom line, the net income increased by 55% to drive EPS growth well above the consensus as well. The GAAP EPS rose $0.36 to $1.57 while the adjusted EPS grew $0.52 to $1.61 and beat the consensus by $0.24.

Looking forward, the company is giving positive guidance but, in our opinion, it is cautious on the top and bottom lines. The company is calling for full-year revenue in a range of $6.56 to $6.77 billion on a -4% to -1% comp versus a $6.67 consensus and we don’t see this happening. At worst, it is our expectation to see comps flat to slightly higher on a YOY basis with that strength carrying through to the bottom line. The bottom line guidance is much better, however, at a minimum of $6.70 compared to the $6.17 consensus and we see considerable upside risk in that figure.

“Our outlook for 2022 reflects an expectation of continued strong financial performance and operational improvements, while thoughtfully considering the headwinds of inflation, supply-chain bottlenecks and the prospect of difficult prior-year comparisons,” said Michael Mullican, EVP and CFO of Academy Sports + Outdoors.

The Technical Outlook: Academy Sports And Outdoors Is Ready To Spring Higher

Price action in Academy Sports + Outdoors jumped in the wake of the Q4 results and looks like they will spring higher in the near, mid, and long-term. The question is if the market can get above the $40 level and we think that it can. This level represents the neckline of a Head & Shoulders pattern that marks a bottom in the stock but may keep it range-bound at these low levels. If the market can get above $40 we see ASO moving up to the top of the larger range near $50 which is in line with the Marketbeat.com consensus estimate. If not, this stock will probably bob along between the $30 and $40 levels until something in the news changes.

Should you invest $1,000 in Academy Sports and Outdoors right now?

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