 - Dick’s Sporting Goods sustains high comps relative to pre-pandemic levels.
- Starbucks’ new CEO is a game-changer and not the only catalyst.
- Ulta Beauty is growing revenue and grabbing market share.
The Q3 earnings cycle is about to heat up and it looks like it could be a rough reporting season. Signs of weakness are everywhere in the market but there are still some pockets of strength. In regard to the consumer, Consumer Staples (NYSEARCA: XLP) is a likely winner as people alter their buying habits, and Consumer Discretionary (NYSEARCA: XLY) is a likely loser, still, even here there are names that stand out as potential winners. Dicks Sporting Goods (NYSE: DKS), Starbucks (NASDAQ: SBUX), and Ulta Beauty (NASDAQ: ULTA) are all discretionary names to an extent but also have staple-like qualities that, when combined with branding, management, and eCommerce, make them solid consumer-oriented names for long-term investors, especially when their shares are trading at such deep discounts to recent highs.
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Dick’s Sporting Goods Looking Good Going Into Q3 Dick’s Sporting Goods surprised the market with its Q2 results and guidance for the second half and that has it set up well going into Q3. The company reported a decline in comps and net sales that were weaker than expected but versus a very tough comp that has the pre-pandemic comparison running at +38%. While Dick’s may continue to see some YOY weakness its market share gains and eCommerce channels should help sustain the very-high pre-pandemic comparison and outperform the consensus figures. The analysts are supporting Dick’s Sporting Goods price action as well. The 19 analysts with current coverage produced 15 positive commentaries since just before the Q2 results were released and afterward. Their activity has the Marketbeat.com consensus rating up to a Moderate Buy from a Hold two quarters ago and the price target is moving higher as well. The $123.40 consensus figure is about 18% above the price action and that is not including the safe 1.8% dividend yield. Additionally, Dick’s Sporting Goods is still carrying a strong 29% short interest that could help fuel the rally as the Q3 reporting time draws near. Dick’s Sporting Goods is slated to report Q3 results in late November. Starbucks Enters A New Age Shares of Starbucks have been trending higher since late summer and look like they may continue moving higher into the end of the year. Incoming CEO Laxman Narasimhan has gotten enough bullish commentary from the analysts that have Starbucks listed as one of Marketbeat’s Most Upgraded Stocks. That trend may continue following the upcoming earnings announcement. The fall weather has pumpkin-flavored everything back on the menu and diehard enthusiasts coming back to the store which is expected to show up on the top and bottom lines. Until then, the consensus rating for Starbucks is a Hold and that is down from a Moderate Buy earlier in the year but offset by a rising consensus price target. The price target of $1.03.50 is 23% above the current price action and up in the 30 and 90 periods. Starbucks will report earnings for Q3 in late October. Ulta Beauty Is A Good-Looking Mall Stock Ulta Beauty is a largely mall-based retailer but don’t hold it against them. The company’s value offering, prominent store positioning, and eCommerce are driving growth and growing market share while maintaining margins. The Q2 results came out late in the season so the Q3 results won’t come out until early December but the outlook is good. The company beat on the top and bottom line in Q2 and raised the guidance to a level well above the prior consensus figures and this guidance may be cautious. The company is expecting YOY growth to slow to the mid to low-single-digit range by the end of the year in spite of what appears to be clear momentum. In regard to the analyst, the Q2 results sparked 13 positive commentaries including one Initiated Coverage at Outperform that has the consensus rating and price target trending higher in the 12, 3, and 1-month comparisons.
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