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Analysts Expected A Beat On Nike's Q3, But Did The Company Just Do It?

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Nike (NYSE: NKE) is getting some love in after-hours trading after the company reported its third quarter results.

There might have been a degree of fear leading up to the release. At market close, shares of Nike were up only 0.15 percent.

Wedbush analyst Corinna Freedman said that she expected a "small beat" on the quarter, but was concerned that it would be overshadowed by conservative guidance for 2014.

"We kind of feel that expectations might be a little high, especially given where the valuation is right now," Freedman told Benzinga Thursday morning.

Nike ultimately reported a Q3 EPS of $0.76 -- $0.04 higher than the Street estimate of $0.72. The EPS also represented a four percent increase from the year-ago period.

Revenue rose 13 percent to $7 billion, beating the Street estimate of $6.7 billion.

"Our strong Q3 results demonstrate our relentless focus on delivering innovations that resonate with consumers," Mark Parker, President and CEO of Nike, said in a company release. "Despite macroeconomic challenges, Nike delivers consistent results because we focus on the biggest opportunities for growth while we manage risk across our diverse global portfolio. This is how we continue to drive long-term value for our shareholders."

Nike also announced that its futures orders were up 12 percent (or 14 percent excluding currency changes).

Rising Star

Up until recently, Nike was a rising star on Wall Street with only a few dips in between its major gains.

The stock is up more than 41 percent over the last two years, and gained more than 237 percent over the last five years.

Year-to-date, however, Nike is up only one percent.

This is due to a sharp decline that occurred in the early part of 2014. Nike closed 2013 with gains of 51 percent, but the stock faced a downward trend toward the end of December 2013. But in the end, Nike only lost 0.57 percent of its value that month.

Things got worse in January 2014 when Nike fell nearly seven percent.

The company has turned the tide, however, and has gained more than 11 percent since February 3, 2014.

An Unforeseen Threat

Freedman said that wearable technology (such as the Nike+ Fuelband SE) represents a "meaningful" part of the business. In addition to the profits earned from selling each device, Nike benefits by gaining information about customers and their habits.

"It's very small in regards to their overall revenue, but it is meaningful for their customer insights and it is an interesting trend, where we're all interested in having the data about ourselves," said Freedman.

Freedman isn't too worried about Android-based devices that might attempt to snatch a piece of Nike's pie. She believes that Fitbit and Jawbone are Nike's biggest competitors.

That said, if Apple were to enter the industry, Freedman thinks the iPhone maker could prove to be more of a threat than a partner.

"There is a possibility that they could pair up, I guess, since they do have that existing partnership from the Nike+ days, but it's too early to tell," she said.

Verdict: Nike Might Still Have What It Takes To Run Rings Around The Competition

Nike may not be impervious to market changes and the whims of fickle investors, but it is still one of the strongest companies in the athletic industry.

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.

Latest Ratings for NKE

Jan 2018WedbushUpgradesNeutralOutperform
Jan 2018BuckinghamInitiates Coverage OnBuy
Dec 2017ArgusUpgradesHoldBuy

View More Analyst Ratings for NKE
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