Dick's Sporting rating cut ahead of report amid signs of retail trouble
This morning, Oppenheimer analyst Brian Nagel downgraded Dick's Sporting (DKS) to Perform ahead of the company's fourth quarter results, saying he is "increasingly concerned" after a large number of leading sporting goods manufacturers and retailers reported weaker than expected earnings. MOVING TO THE SIDELINES: In a research note this morning, Oppenheimer's Nagel downgraded Dick's Sporting to Perform from Outperform ahead of quarterly results. The analyst told investors that he is "increasingly concerned" after a large number of leading sporting goods manufacturers and retailers reported results well shy of expectations, all while certain industry-wide sales trackers also hinted at top-line disruptions for the sector. Nagel noted that hints of a setback in the fourth quarter or into 2017 are likely to undermine near-term investor confidence in the Dick's Sporting story. The analyst lowered his fourth quarter earnings per share forecast to $1.27 from $1.30, versus a current Street figure of $1.30 and management earnings guidance of $1.19-$1.31. Additionally, he lowered his fiscal 2017 and fiscal 2018 earnings forecasts to $3.62 and $4.00 from $3.75 and $4.10, respectively, with current consensus estimates at $3.78 and $4.18. If fourth quarter results and/or initial 2017 guidance fall short of Street expectations, shares could trade down to the mid- to low-40s, Nagel contended. However, while the analyst has now assumed a more cautious nearer term stance on the company, he pointed out that Dick's Sporting has not pre-announced fourth quarter results, implying that earnings per share should at least be tracking in-line with guidance. Nagel also believes the company remains the preeminent market share taker in the sector following recent significant competitive fallout, and "very much" looks on Dick's Sporting Goods as the clear survivor among leading chains. SALES WEAKNESS AT SPORTING GOODS SUPPLIERS: Oppenheimer's Nagel also highlighted that sales have been weak at leading sporting goods suppliers lately. Sales at Columbia Sportswear (COLM), Under Armour (UAA; UA), and Vista Outdoor (VSTO) all tracked shy, in some cases "well shy," of Street expectations in the period ended December, he noted. Additionally, the analyst pointed out that leading sporting goods retailers struggled into 2016 year-end, with Big 5 Sporting Goods (BGFV), Cabela's (CAB), Finish Line (FINL), and Hibbett (HIBB) reporting results for their respective quarters, ranging from November to January, also shy of expectations. PRICE ACTION: In morning trading, shares of Dick's Sporting Goods have advanced fractionally to $49.87.