How Analysts View Nike After Earnings

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Nike Inc. (NYSE: NKE) released its fiscal third-quarter financial results this week, and despite a strong beat on the bottom line, the stock tumbled to close out the week lower. Although it could be argued that this was a good report, Nike’s problems lie with its competition in Under Armour and Adidas.

24/7 Wall St. has included some of the main highlights from the earnings report, as well as what analysts are saying after the fact.

In its report, Nike said it had $0.68 in earnings per share (EPS) and $8.4 billion in revenue, compared with Thomson Reuters consensus estimates of $0.53 in EPS and revenue of $8.47 billion. The same period from last year reportedly had EPS of $0.55 and $8.03 billion in revenue.

The Nike brand reported that revenues were up 7% to $7.9 billion on a currency-neutral basis, driven by double-digit growth in Western Europe, Greater China and emerging markets, as well as the sportswear and Jordan brand categories. On the other hand, revenues for Converse were up 3% to $498 million, driven by growth in North America.

Over the course of the fiscal third quarter, Nike repurchased $475 million worth of shares as part of its four-year, $12 billion program approved in November 2015. Roughly $8.4 billion remains under the current repurchase plan.

On the books, Nike’s cash and short-term investments totaled $6.2 billion, an increase of $1.1 billion compared with the prior year, as growth in net income and proceeds from the issuance of debt in the second quarter of fiscal 2017, as well as proceeds from employee exercises of stock options, more than offset share repurchases, higher dividends and investments in infrastructure.

Some analysts took this opportunity to update their price targets on Nike:

  • Wedbush Securities maintained its Neutral rating and $52 target.
  • Jefferies maintained its Buy rating and $74 target, calling the gains by Adidas at a peak; the firm is positive on Nike’s current product cycle.
  • Merrill Lynch maintained its Underperform rating on Nike, noting that Vapormax could miss high expectations and with revenues expected to remain pressured.
  • Citigroup raised its price target to $66 from $60.
  • Deutsche Bank cut the price target to $64 from $66.
  • FBR lowered its price target to $53 from $55.
  • Susquehanna has a positive rating and raised the price target to $65 from $64.

Shares of Nike closed Friday at $56.36, with a consensus analyst price target of $62.60 and a 52-week trading range of $49.01 to $62.64. Over the course of the week the stock closed down 2.5%.