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Nike On Track For 'Another Swoosh-Shaped Recovery'

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Nike On Track For 'Another Swoosh-Shaped Recovery'
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Nike Inc (NYSE: NKE) seems poised for multi-quarter acceleration and its stock is significantly de-risked, UBS’ Michael Binetti said in a report. He reiterated a Buy rating for the company, with a price target of $70. The analyst commented that 1Q should see some more inventory clearing, setting the path for another massive recovery by 2Q.

Nike reported its 4Q EPS at $0.49, a penny ahead of Street expectation. Although the US athletic industry is experiencing a historic disruption, the company’s revenue missed the estimate by only 1 percent, analyst Michael Binetti pointed out. Despite guiding to a tough 1Q17, Nike broadly maintained its FY17 guidance.

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“We think NKE laid out a visible path to accelerating revs & EPS each quarter after 1Q (and 1Q guidance $0.13-$0.22 below the Street seems very conservative),” Binetti wrote. He added that Nike would likely exit FY17 with revenue growth at low double-digit percent, with EPS growth around 30 percent. The company is likely to enter 1Q18 “with similar momentum lapping Olympics SG&A.”

Positive Leading Indicator

The TSA closing resulted in unexpectedly extended clearance into 1Q. Nike has now moved the remaining clearance inventory out of its full-price channel and the 1Q guidance “leaves room” to clear the remaining inventory with minimal risk to the EPS forecast, the analyst noted. “Importantly, with full-price story inventory clean, NKE is seeing much better traction w/new premium innovation.”

Latest Ratings for NKE

DateFirmActionFromTo
Jan 2017CLSAInitiates Coverage OnUnderperform
Jan 2017Atlantic EquitiesInitiates Coverage OnOverweight
Dec 2016Cowen & Co.DowngradesOutperformMarket Perform

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