Imperial Capital Upgrades Dicks To Buy, Predicts ~20% Upside

In a report published Wednesday, Imperial Capital analyst John O'Neil upgraded the rating on Dicks Sporting Goods Inc DKS from In-Line to Outperform, while maintaining the $62 price target. The analyst believes that the improvement in hunting and golf trends suggest EPS acceleration in 2H15. Given the recent decline in the share price and the improved earnings visibility, the analyst believes that the stock is a "favorable" investment option. "Although 2014 results suffered from weak sales and margins in the golf and hunting categories, we see these categories rebounding from easy comparisons and combining with continued growth in apparel to enable earnings to accelerate in 2015," O'Neil stated. The analyst expects the company to deliver robust double-digit growth in earnings in 2015, while the transition to a new ecommerce platform would provide additional opportunities for margin enhancement during the next two years. "Importantly, our analysis of seasonal trends points to mid-single digit growth in 3Q for firearm demand. We note that the golf and hunting segments combine for about 30 percent of DKS sales, maybe a touch higher depending on the seasonality," O'Neil added.