Analyst Note| David Swartz |
Once again, no-moat Dick’s Sporting Goods crushed our sales and margin expectations in 2021’s third quarter, as the resumption of team sports and the continuing popularity of activewear boosted results. Yet, its shares dropped by a mid-single-digit percentage on the report as its outlook suggests fourth-quarter sales will be roughly flat with last year (although still up about 20% over 2019). Realistically, Dick’s sales growth and earnings over the past few quarters have been far above normal levels, so a slowdown seems inevitable. For some context, Dick’s adjusted EPS of $3.19 in the third quarter was an increase of more than 500% over the $0.52 earned in the same 2019 period. Regardless, we expect to lift our $63 fair value estimate by a high-single-digit percentage on the outperformance, although we continue to view its shares as overvalued.