Nike Shares Rebound As Basketball Segment Bounces Back To Growth

Nike Inc NKE reported better than expected FQ2 results, with both revenue and SG&S beating the consensus expectations, and in line gross margin.

Deutsche Bank’s Dave Weiner maintained a Buy rating on the company, with a price target of $65.

Weiner mentioned that “North America inventories are controlled, product innovation is forthcoming, and basketball is set to return to growth.”

However, both global and North American futures orders were disappointing, although management believes that they are “less relevant."

Nike reported Q2 EPS at $0.50, ahead of the consensus, driven by lower than anticipated SG&A and revenue growth.

Management “spoke extensively about the innovation pipeline. In the coming months, Nike will introduce the Air VaporMax platform in running and expand its Hyper Adapt technology across categories,” Weiner stated.

Basketball To Grow

Following a slowdown in FY 2016, the basketball segment appears set to grow in H2, driven by improved product designs and refined price points.

The analyst pointed out that despite increasing FX headwinds, the company reiterated its FY revenue guidance, while lowering the SG&A target.

The FY 2017 EPS estimate has been raised from $2.29 to $2.34, largely to reflect lower SG&A, offset partly by lower revenue and gross margin.

The stock opened at $53.35, but traded recently at $51.97.