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Robert Ohmes, an analyst at the firm, noted that these positives helped to counter the weakness engendered by lower gross margin, as its North American business sees inventory clearance, shift in expenses from operating overhead to COGS, impact from exiting gold business and forex impact.
Among the categories that led to revenue growth were sportswear, running, women's and brand Jordan.
North American Futures Sag
BofA Merrill Lynch noted that North American futures growth of 1 percent was below its 6 percent forecast, while futures at Western Europe, emerging markets and Japan all remain strong. Global forex neutral futures growth also decelerated. The firm attributed the weakness in North America to the company's efforts to rebuild a pull market. The firm noted that direct-to-consumer remained very strong.
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2017 EPS Estimate Intact, 2018 Cut
The firm maintained its 2017 earnings per share estimate at $2.35, as upside surprise in the first quarter is offset by shrinking margins expected due to inventory clearance. However, the firm lowered its 2018 earnings per share estimate by $0.05 to $2.90, citing lower revenue outlook due to deceleration in future orders.
Rating And Logic
As such, BofA Merrill Lynch remains Neutral on the shares of Nike and has a $55 price objective for the shares.
The Neutral rating is premised on the company losing market share in North America for the first time since 2010, as adidas AG (ADR) (OTC: ADDYY) and Under Armour Inc (NYSE: UA) make inroads. Additionally, Nike's obsession with technical products and scope for deceleration in futures orders in Western Europe, China and emerging markets may also hurt, the firm noted.
The firm also feels profit outlook would suffer from competition for endorsements and industry talent.
At time of writing, shares of Nike were down 1.52 percent at $54.52.
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New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.