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UBS Raises Dicks Sporting Goods Price Target, Could See String Of Accelerating Gains

Dicks Sporting Goods Inc DKS 0.62% has a favorable risk to reward profile, at least according to Michael Lasser of UBS.

In a report published Friday, Lasser said Dicks' upcoming second quarter earnings print (August 16) could "set the stage for a string of accelerating gains." The analyst believes that at this point, the company's second quarter print is actually an "after-thought" compared to the "compelling" investment case.

Lasser is estimating Dicks' second quarter comps will decline by just 1.5 percent, which is at the better end of management's guidance for a 1 to 4 percent decline. The second quarter's performance wasn't as severely impacted by The Sports Authority's liquidations as originally assumed, which presents the case for upside.

Looking forward, Dicks is in good position to benefit from several quarters of "meaningful" share gains which will result in "outsized" sales and earnings per share growth. In addition, the company's forward looking guidance and commentary "could surprise how quickly its benefiting from industry consolidation."

Finally, Lasser suggested that the 31 stores Dicks acquired from TSA will prove to be "far greater than average" in terms of productivity and this isn't factored into the analyst's model and could add $0.15 to $0.20 in incremental earnings per share next year. This could generate upside compared to the consensus estimate of $3.47.

Bottom line, Dicks' is demonstrating "an improving competitive positioning" and the "risk/reward paradigm" is in the company's favor at current levels.

Shares remain Buy rated with a price target raised to $61 from a previous $57.

Aug 2016SusquehannaInitiates Coverage onPositive
Aug 2016UBSMaintainsBuy
Aug 2016Goldman SachsMaintainsBuy

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