DKS - Dick's Sporting Goods continues post-earnings pop as UBS raises estimates

2023-03-08 11:48:19 ET

Dick’s Sporting Goods ( NYSE: DKS ) continued to gain on Wednesday, adding to a double-digit gain during Tuesday’s trading.

The sporting goods retailer’s stock drove to an all-time-high on Wednesday after posting above-consensus earnings for the fourth quarter. A 5.3% rise in comparable sales was a particular bright spot, more than doubling the analyst expectation .

The positive results prompted UBS to take a more bullish view of the road ahead as well. Equity analyst Michael Lasser indicated that the dividend hike should be taken as a particular sign of confidence in the business by management. Based upon the dividend raise, he hiked his valuation multiple from 10x to 12x. He also updated his EPS forecast for 2023 to $13.36 from a prior $12.20.

“The bulls are optimistic about the company’s prospects moving forward. They point to the DKS

momentum, its success with vertical brands, its strong partnerships with key vendors like NIKE, and the prospect of accelerating unit growth in 2023,” Lasser said, outlining the bull and bear arguments. “The skeptics argue that DKS’s margins have more room to fall than to grow. Skeptics believe that the premium assortment at DKS was highly beneficial for the company in 2022. They argue the benefit of these trends will only last so long.”

Taking the balance of these arguments, he retained a Neutral rating on the stock. However, he hiked his price target to $150 from a prior $130 based on his reassessment of the company’s multiple and earnings power.

Shares of Dick’s ( DKS ) rose 1.31% on Wednesday, adding to an over 11% gain on Tuesday. Shares of the Pennsylvania-based specialty retailer have risen nearly 25% year to date.

Read the company’s most recent earnings call transcript .

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