Shares of sporting goods and outdoor recreational products provider Academy Sports and Outdoors, Inc. (ASO) have gained 113.8% so far this year. Recently, ASO delivered better-than-expected Q2 performance and upped its guidance for 2021.
Further, the company announced the pricing of secondary offering of common shares and concurrent share repurchase. The secondary offering of approximately 18.6 million shares is by affiliates of Kohlberg Kravis Roberts & Co (KKR) at $44.75 per share.
ASO will repurchase 4.5 million of these shares at $43.52 per share for an aggregate value of $200 million. These shares will be bought under the company’s recently announced $500 million stock buyback program.
Amid this development, let’s take a look at the company’s latest financials and understand what has changed in its key risk factors that investors should know.
Driven by higher demand, improving in-stocks and strength in the sporting goods and outdoor recreation market, ASO’s Q2 revenue increased 11.5% year-over-year to $1.79 billion, beating consensus of $1.64 billion. Compared to Q2 2019, ASO’s Ecommerce sales rose 207.2% during this period.
Moreover, a 500 basis points expansion in gross margin to 35.9% helped ASO notch its highest ever gross profit of $642.5 million. The higher gross profit was attributable to a combination of favorable product mix, higher average unit retails and lower promotional activity.
Earnings per share of the company increased to $2.34 versus $1.81 a year ago. In comparison, analysts had estimated earnings per share of $1.37 for this period. (See ASO stock chart on TipRanks)
Looking ahead, for full fiscal 2021, ASO estimates net sales to be between $6.46 billion and $6.62 billion. It sees earnings per share in the range of $5.45 to $5.80.
ASO’s Executive Vice-President and CFO, Michael Mullican, said, “We continue to improve profitability at a higher rate than our sales growth. As a result, we are increasing our fiscal 2021 guidance. Looking ahead, we expect to utilize our capabilities to accelerate our omnichannel, new store, and other growth initiatives.”
On September 10, Loop Capital Markets analyst Daniel Adam reiterated a Buy rating on the stock and increased the price target to $58 from $45. The analyst noted “another earnings beat and raise” for ASO on the back of robust demand across all product categories.
Based on 4 Buys and 1 Hold, consensus on the Street is a Strong Buy for ASO. The average ASO price target of $51.25 implies 13.1% upside potential.
Now, let’s look at what’s changed in the company’s key risk factors profile.
According to the new Tipranks’ Risk Factors tool, ASO’s main risk category is Finance & Corporate, which accounts for 47% of the total 47 risks identified. Since July, the company has changed one key risk factor related to KKR’s stake in the company.
At the end of July, KKR owned about 20% of voting power in ASO stock. ASO acknowledges that KKR will be able to exercise substantial influence on the company’s corporate and management policies and their interests may be in conflict with that of other stockholders.
Additionally, KKR and its affiliates may pursue acquisitions, divestitures, and other transactions that may be beneficial to KKR but may involve risks to ASO’s other stockholders.
The Finance & Corporate risk factor’s sector average is at 35%, compared to ASO’s 47%.