Nike: Strong Earnings Reaffirm ‘Top Pick’ Status, Says Oppenheimer
Like many others, heading into F3Q’s earnings report, Nike (NKE) shares had been on the backfoot in 2022. Supply chain woes, rising inflation and Russia’s invasion of Ukraine all played their part in keeping sentiment low.
However, underestimate the swish machine at you peril. The sports apparel giant brushed those issues aside, easily beating Wall Street’s expectations in the quarter.
Revenue increased by 4.9% year-over-year to reach $10.87 billion, coming in above the sales of $10.6 billion the analysts had predicted. EPS of $0.87 handily beat the Street’s $0.71 call.
Gross margin rose by 100 basis points to 46.6%, which the company put down to the ongoing success of selling direct to consumers. Nike Direct sales showed a 17% year-over-year uptick.
North American sales grew by 9%, although in China, Nike’s 3rd biggest market, revenue declined by 5% year-over-year to $2.16 billion.
That, however, was the only territory where sales dropped compared to the same period last year. In any case, Oppenheimer’s Brian Nagel notes that Chinese sales actually improved sequentially, and highlights the fact management said it expects sales in the region to keep on trending upwards in the May quarter (Q4).
All in all, Nagel is highly impressed with the company’s display: “We look very favorably upon continued sales and profit trends at NKE... Recent results and commentary from senior leadership of the company show clearly that NKE is managing well various external headwinds, including ongoing supply chain distributions and geopolitical tensions, across the globe… We are optimistic that money will soon flow back into NKE shares as the market focuses more upon the superb execution prowess of the company.”
NKE remains a “top pick” for Nagel who reiterated his Outperform (i.e., Buy) rating and $195 price target. Investors could be pocketing gains of 45%, should Nagel's thesis play out as expected. (To watch Nagel’s track record, click here)
Most analysts agree. Based on 19 Buys vs. 6 Holds, the stock qualifies with a Strong Buy consensus rating. Going by the $165.09 average price target, shares are anticipated to climb ~23% higher over the one-year timeframe. (See Nike stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.