UBS Remains Bullish on Dick's Sporting Goods (DKS) Following 3Q
UBS reiterated a Buy rating and $66.00 price target on Dick's Sporting Goods (NYSE: DKS) following the company's 3Q earnings report. DKS guided to 4Q EPS of $1.19-$1.31 on a comp of 3-6%. The mid-point of its guidance implies a flattish OM in 4Q, which UBS believes is overly conservative given its easy compare.
Analyst Michael Lasser commented, "While the lack of earnings flowthrough on a strong comp led to a sell-off today, we believe concerns are overblown. DKS reported a solid 5.2% comp, which amounted to an acceleration on a 2-yr stack (160 bps), but a slowdown on 3-yr (-50 bps) & 4-yr stacks (-140 bps). Though, this deceleration probably related to some TSA liquidation related pull-forward & warmer weather in Oct. DKS' footwear category remained strong, driven by its new footwear decks. It plans to add ~40 more decks by '17, suggesting this pilot is yielding good results. Plus, its online growth saw a brisk acceleration & this channel accounted for ~10% of total sales. While the favorable World Series matchup probably contributed ~100 bps to DKS 3Q comp, there should be some lingering benefits in 4Q. Plus, the weather forecast for Dec. indicates it's going to get cold. This should support demand for its seasonal products. Beyond this, we think it can realize gains from its stronger industry position for more than just a few Qs."
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Shares of Dick\'s Sporting Goods closed at $56.71 yesterday.