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How To Position Ahead Of Nike's Q2 Earnings Report

How To Position Ahead Of Nike's Q2 Earnings Report
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Nike Inc (NYSE: NKE) is scheduled to report its FQ2 2017 results on December 20. Upside to expectations is “limited by the lackluster retail environment and shifting athletic trends,” DA Davidson’s Andrew Burns said in a report.

Burns maintained a Buy rating on the company, with a price target of $66.

Burns projected FQ2 revenue and EPS of $8.076 billion and $0.42, slightly below the current consensus expectations of $8.109 billion and $0.43, respectively. The estimates reflect gross margin contraction of 125bp year-over-year to 44.3 percent and SG&A growth of 3.5 percent year-over-year, resulting in a 75bp contraction in operating margin to 11.5 percent.

Amid Rising Competition

“The U.S retail landscape continues to be difficult with weaker brick and mortar traffic and a never ending promotional cycle,” Burns noted. He added that although athletic brands continued to perform the best in the apparel and footwear segments, Nike’s competitors were becoming stronger and “appear to be ahead of NKE in addressing sport fashion, athleisure and sport retro trends.”

While Nike would likely address these trends in the coming seasons, any revenue shortfalls in the near term could offset the company’s greater expense discipline, the analyst mentioned. He named Lululemon Athletica inc. (NASDAQ: LULU), adidas AG (ADR) (OTC: ADDYY) and Under Armour Inc (NYSE: UAA) as competitors that were strengthening.

Latest Ratings for NKE

Apr 2017ArgusDowngradesBuyHold
Jan 2017Atlantic EquitiesInitiates Coverage OnOverweight
Jan 2017CLSAInitiates Coverage OnUnderperform

View More Analyst Ratings for NKE
View the Latest Analyst Ratings

Posted-In: Andrew Burns DA DavidsonAnalyst Color Long Ideas Reiteration Analyst Ratings Trading Ideas Best of Benzinga


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