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These reports, excerpted and edited by Barron’s, were issued recently by investment and research firms. The reports are a sampling of analysts’ thinking; they should not be considered the views or recommendations of Barron’s. Some of the reports’ issuers have provided, or hope to provide, investment-banking or other services to the companies being analyzed.
Dick’s Sporting Goods
NYSE-DKS
OutperformPrice $57.88 on Sept. 30
by Cowen
Our checks show digital strength continuing at Dick’s, and promotional cadence in softlines—both online and in-store—maintaining a better-than-consensus trajectory. Our analysis of the Academy Sports [ticker: ASO] S-1 filing suggests that DKS maintains a competitive advantage.
In fiscal year 2019, Dick’s total sales of $8.7 billion compared to the sporting-goods and hobby-store segment’s sales of $80.2 billion, according to the U.S. Census Bureau retail sales report. This 11% market share was up from 6% in fiscal 2010. And Dick’s had a 10.5% share from February to July of this year, versus 10.4% in the same 2019 period. Dick’s continues to engage existing consumers, while acquiring new consumers digitally. We see same-store sales rising 11% (stores, 5%; e-commerce, 50%) in the third quarter, and 8% in the fourth (stores 2%; e-com, 25%).
Our updated model and slightly lowered diluted earnings-per-share estimate reflect incremental share issuance from a $525 million convertible offering. Management will balance the dilution with share repurchases.
Our price target is $68.
Cubic
CUB-NYSE
Buy Price $58.17 on Oct. 1
by Canaccord Genuity
We are maintaining our Buy rating on Cubic and increasing our price target to $65, from $58. Since the [defense and transportation company] disclosed the 15% position taken by [activist investor] Elliott Management and implemented a rights plan, the stock is up about 31%. Our continued bullish outlook is based on the premise that the company eventually will enter into some sort of agreement with Elliott [and its private-equity partner Veritas Capital], or that it will materially accelerate its valuation-creation activities. Cubic’s fiscal fourth-quarter results should at least be in line with expectations, but this is not likely to be a material catalyst now, after the stock move.
There have been reports that Elliott has made a formal offer for the company. However, it’s difficult to predict the probability of a transaction. We see three potential paths: The first is that the company agrees to a buyout by Elliott (likely at a price higher than our target). The second is that it holds off Elliott and continues as a public company (a likely negative for the stock). The third is that Cubic launches a sale process. The greatest probability is for an acquisition by the Elliott/Veritas team.
Tetra Tech
TTEK-Nasdaq
Buy Price $94.97 on Sept. 29
by Maxim Group
Tetra Tech announced yesterday that it had acquired BlueWater Federal Solutions. This fits in with the company’s plan to expand its advanced data-analytics practice through organic growth and acquisitions. We are raising our price target to $110, from $102, representing 30 times our fiscal year 2022 EPS estimate. We increase our fiscal 2021 EPS estimate to $3.45, from $3.44 and fiscal 2022 estimate to $3.68 from $3.60.
Tetra Tech has completed five acquisitions in the past four years to supplement organic growth in advanced analytics, which includes activities such as evaluating and protecting the safety of water resources, predicting flood damage, assessing fire damage, and monitoring water-treatment facilities remotely. TTEK remains one of the only members of our 27-company coverage universe that is simultaneously (on an annual basis) increasing its dividend, repurchasing shares, reducing debt, and completing complementary acquisitions.
Northfield Bancorp
NFBK-Nasdaq
Overweight Price $9.12 on Oct. 1
by Piper Sandler
We are increasing our rating to Overweight from Neutral, with a $12 price target.
Northfield Bancorp is relatively well positioned for the current low interest rate environment and should realize synergies in the wake of its acquisition of VSB Bancorp. Furthermore, we look at NFBK as a solid defensive play, with a conservative credit profile and plenty of capital to weather any storm.
Additionally, the bank’s capital levels make it an excellent candidate to restart stock buybacks. This is especially true, given that its shares trade at less than 70% of tangible book value per share.
The company’s proximity to New York City likely has negatively influenced its valuation, but we note that its footprint is largely outside the urban center of Manhattan and is more in suburban New Jersey and Staten Island.
MarineMax
HZO-NYSE
Buy Price $25.67 on Oct. 1
by B. Riley Securities
MarineMax has completed its acquisition of SkipperBuds and Silver Seas Yachts. The transaction adds 20 locations to MarineMax’s network, mostly in the Great Lakes region and on the West Coast (bringing the total to 77). It also expands the company’s presence in additional markets and key boat segments, and provides additional cycle-resilient, recurring revenue streams.
We are reiterating our Buy rating and $33 price target.
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