Dick's Getting Buy Signals; Canaccord Upgrades Shares

• Shares of Dicks Sporting Goods Inc DKS are down 21 percent year-to-date, but still above their 52-week low of $33.42.
• Canaccord Genuity’s Camilo Lyon upgraded the rating on the company from Hold to Buy, while raising the price target from $46 to $48.
• Favorable comps and 2016 Olympics are expected to boost the company’s performance in 2016, Lyon stated.

Dicks Sporting reported weak 3Q results largely due to unseasonably warm weather and its impact on sales of cold weather gear.

Analyst Camilo Lyon believes the company should be able to manage its exposure by returning slow-turning goods, cancelling deliveries and seeking markdown support from its vendor partners.

The company’s 4Q implied gross margin guidance of -150bps looks to be “a worst-case scenario” in which it stays warm throughout the winter, Lyon noted.

The analyst believes Dicks Sporting is set to outperform over the coming year in view of its ability to manage through 4Q with minimal margin impact, solid underlying footwear and apparel trends along with a stabilizing supply demand scenario in golf and favorable comparison boosted by the 2016 Olympics.

Dicks Sporting performance in 2015 was negatively impacted by the late start of sping’15, weakness in golf in 2Q and unseasonal weather thereafter, the analyst pointed out adding the combination of easy comparisons and a major global sporting event should allow the company to perform well in 2016.