UPDATE: SunTrust Robinson Humphrey Downgrades Dick's Sporting Goods (DKS) to Neutral
SunTrust Robinson Humphrey downgraded Dick's Sporting Goods (NYSE: DKS) from Buy to Neutral with a price target of $51 (from $66.) 2014 EPS estimates were reduced to $2.80 from $3.20. Analyst David G. Magee said Q1 was disappointing, and he thinks it sets a negative tone for the year.
"Management called out hunting and golf as the troubled categories during the period. In our opinion, the Street had expected some potential sloppiness due to weather, but the issues seem deeper. In fact, after showing some bright spots in recent quarters, 1Q results may well cause investors to think there has been a reversion to the mean (i.e., back to the volatility of recent years)," said Magee. "Unfortunately, it looks like earnings will be under pressure for the balance of the year. Golf, which appears to be running negative, is very important to the 2Q, and management has indicated that hunting will be negative all year. In addition, inventories are currently high (+6% on a per foot basis), and the fourth quarter comparison this year is difficult (unlike most retail)."
"There may be also some increased questions on the pace of growth (+10%), expanding the new outdoor concept, as well as the size of the core concept boxes," he added. "The stock is poised to open at $45 which represents a 16x multiple on our new 2014 estimate. Because of the aforementioned issues, there could be some additional multiple contraction…possibly to the 14x level."
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Shares of Dick\'s Sporting Goods closed at $53.16 yesterday.