Dick's Sporting Goods Reports Mixed Q3: An Analyst Roundup

Dicks Sporting Goods Inc DKS reported mixed third-quarter results Wednesday and analysts had plenty to say about it.

JPMorgan 

JPMorgan analyst Christopher Horvers said Dick’s risk-reward is turning more balanced — and after a 47-percent gain in shares over the past year, his thesis is largely played out.  

“Said succinctly, while we see the topline story improving from here, and DKS will clearly benefit from its 'last man standing' status with vendors now supporting channel management, we find the risk-reward less appealing." 

The analyst downgraded the company from Overweight to Neutral and lowered the price target from $46 to $41.

BofA 

Bank of America Merrill Lynch analyst Robert Ohmes said Dick’s remains committed to disciplined expense management to offset expected gross margin pressures from a continued shift to e-commerce.

The retailer is getting better access to premium footwear from key vendors Nike Inc NKE and adidas AG (ADR) ADDYY, the analyst said.

BofA reiterated a Neutral rating and $40 price target. 

Wedbush 

Wedbush analyst Christopher Svezia said that while Dick’s Q3 earnings beat was driven by better-than-expected SG&A that led to a raised EPS outlook, the timing for an inflection to both consistent positive comps and margin expansion is still uncertain.

Dick’s management said that it expects 2018 comps to be down 3-4 percent year-over-year.

The retailer is taking the proper steps to navigate evolving consumer and category headwinds, but flat-to-slightly positive comps and flat EBIT do not drive shares appreciably higher, the analyst said. Wedbush maintained a Neutral rating with a $38 price target.

Baird 

Baird analyst Peter Benedict said the sporting goods sector backdrop is firming and e-commerce trends remain solid. Slowing new store growth is a positive development, the analyst said. 

"From a financial standpoint slower store growth will benefit FCF and potentially ROIC,” the analyst said. 

Baird maintained a Neutral rating and raised the price target from $39 to $40.

Raymond James

Raymond James analyst Dan Wewer maintained a Market Perform rating and said the below-average valuation metrics for Dick's relative to hardline retail are justified.

“It appears the threshold for what the company deems as favorable sales results is getting lower," the analyst said. "However, management did note that weather has been very favorable so far, which could most certainly change for the worse as the quarter progresses." 

Growth in private brands is critical to Dick's long-term success, Wewer said; the company’s goal is to double its private label penetration to 25 percent of total sales.

“We believe private label will remain a successful defensive tactic for Dick’s, which in turn could lead to even greater space allocation starting in FY19." 

Price Action

Dick's shares were up 1.35 percent at $36 at the close Friday. 

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