Companies and Brands

What Analysts Are Saying About Nike After Earnings

Chris Lange

Published: September 26, 2018 12:45 pm

Last Updated: January 11, 2020 5:17 pm

Nike Inc. (NYSE: NKE) released its fiscal first-quarter financial results after the markets closed on Tuesday. While Nike posted strong results for the quarter, it didn’t seem to be enough to push the stock higher from its all-time highs. Analysts were generally positive in their view of the stock as well.

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

The apparel giant said that it had $0.67 in earnings per share (EPS) and $9.95 billion in revenue, compared with consensus estimates of $0.62 in EPS and revenue of $9.88 billion. The same period of last year reportedly had EPS of $0.57 and $9.07 billion in revenue.

During the latest quarter, revenues for the Nike Brand totaled $9.4 billion, up 10% on a currency-neutral basis, driven by double-digit growth internationally, and in Nike Direct, strong momentum in North America, and growth in almost every category led by Sportswear. Revenues for Converse were $527 million, up 7% on a currency-neutral basis, mainly driven by growth in Europe and Asia.

Also in this time, the company repurchased a total of 17.8 million shares for $1.4 billion as part of its four-year, $12 billion program approved by the board of directors in November 2015. As of August 31, 2018, a total of 167.2 million shares had been repurchased under this program for roughly $10.1 billion. In June 2018, the board authorized a new four-year $15 billion share repurchase program that will commence upon the completion of the current program.

Merrill Lynch reiterated an Underperform rating for Nike but raised its price objective to $55 from $50. Keep in mind this is the most bearish firm on Nike. The brokerage firm gave its investment rationale as follows:

We rate Nike shares Underperform. We expect sales and earnings growth to decelerate on market share pressures and intensifying competition. We see downside to NKE’s current P/E multiple given market share pressure in the U.S. and difficult International comparisons, which offset strong direct-to-consumer momentum and strength in China.

Credit Suisse reiterated an Outperform rating with a $90 price target. Credit Suisse said in its report:

We see no change to our thesis that Nike is poised for sustained growth & global share gains from here. Nike suggested first quarter revenues were ahead of plan, even though it stopped short of raising its annual revenue target due to recent FX headwinds. We were somewhat disappointed at the lack of GM upside, but inventory control was strong (flat YOY vs revenues +10%) and Nike reiterated that GM tailwinds accelerate in fiscal second half (we estimate reversing multi-year headwinds from FX + excess markdowns should add 200 basis points of GM opportunity).

Here is what a few other analysts had to say:

• Wedbush reiterated an Outperform rating with a $90 price target.
• Jefferies reiterated a Hold rating and raised its price target from $75 to $80.
• Macquarie reiterated an Outperform rating and raised its target to $98 from $87.
• Deutsche Bank reiterated a Buy rating and lowered its target to $91 from $92.
• Citigroup reiterated a Buy rating and raised its price target from $87 to $94.
• Morgan Stanley reiterated it as Overweight and raised its target to $103 from $88.

Shares of Nike were last seen down over 1% at $83.63, with a consensus analyst price target of $85.61 and a 52-week trading range of $50.35 to $86.04.

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