Key Takeaways
- Senator Investment Group, which manages $4.92 billion, sold all of its DICK’S Sporting Goods and Element Solutions shares in the third quarter, its 13F shows.
- DICK’S cut its full-year earnings guidance in August, and analysts’ average target now sits just 10% above the stock.
- Element Solutions is posting record results but has agreed to be bought by Solstice Advanced Materials for cash and stock, so its shares now move partly with Solstice’s.
- The numbers back the DICK’S sale best. Element is the sale that’s harder to defend.
A $4.9 billion fund has walked away from two stocks that have had a rough few months. Senator Investment Group’s 13F for the quarter ended Sept. 30, filed Nov. 12, shows it sold every share of DICK’S Sporting Goods (DKS) and Element Solutions (ESI) during the quarter.
Neither was a big bet. On June 30, Senator held 200,000 DICK’S shares worth $45 million, 1.7% of its 13F stocks, and 725,000 Element shares worth $35 million, 1.3%.
Sneakers tripped up DICK’S
DICK’S missed second-quarter estimates on Aug. 25 and cut its full-year adjusted EPS guidance to $11.00-$12.00. With its first-quarter results, it had stood by $13.50-$14.50. It pointed to weaker demand for athletic footwear and apparel, and it no longer expects comparable sales growth this year at Foot Locker, which it bought last year.
DICK’S shares are 36% below their June 30 price, the last day Senator’s filings show it holding them. A 13F shows only what a fund owned at a quarter’s end, so there’s no telling whether Senator sold before the August report or after it.
Wall Street has already marked DICK’S down
Analysts’ average price target for DICK’S has fallen from $242 a year ago to $160:
That’s just 10% above the $145.66 share price, from 28 analysts, and their targets run from $99 to $205. At about 12x forward earnings, DICK’S looks cheap on paper, but those earnings rest on guidance that just came down hard. The company hasn’t yet had a report to show that the new range will hold.
TIKR tracks 28 analysts on DICK’S Sporting Goods. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on DICK’S Sporting Goods, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See DICK’S Sporting Goods’ Analyst Ratings
Element now moves with Solstice
Element’s own business is in good shape. In its third-quarter results on Oct. 22, sales rose 52% to $995 million, or 13% on an organic basis, and adjusted EPS rose 22% to $0.50. Management also raised its full-year adjusted EBITDA guidance to about $720 million.
But Element’s holders are now waiting on a deal. Solstice Advanced Materials (SOLS) agreed on July 6 to buy Element for cash and stock, in a deal valued at about $14.5 billion, and Solstice’s own shares fell 15% that day. Since part of the price is paid in Solstice stock, Element’s shares now move partly with Solstice’s. They’re 30% below their June 30 price.
Analysts’ average target for Element has climbed over the year, from $31 to $47:
That’s 42% above the $33.32 share price, from 12 analysts, and even the lowest target, $42, sits well above it. At about 16x forward earnings, Element costs more than DICK’S, but its earnings are still rising. My read: with a buyer lined up, investors wouldn’t leave a gap that wide unless they doubted what the deal will be worth when it closes, or whether it closes at all.
The DICK’S sale holds up better
Of the two, the numbers back the DICK’S sale best. The stock is cheap for a reason, and the Street sees little upside from here. The risk for anyone buying now is that sneaker demand stays soft and Foot Locker weighs on earnings again.
Element is the sale I’d question. The business is setting records, and the Street sees far more upside. How much of that upside holders actually get depends on Solstice’s shares and on the deal closing.
DICK’S reports its third quarter in late November, the first test of whether its new guidance holds. Senator’s next 13F, due in mid-February, will show what it owned at the end of the year.
So what is DICK’S Sporting Goods stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
