Nike Inc NKE is set to report third-quarter earnings after the close Thursday, and investors are watching the company’s innovation pipeline and potential commentary on executive succession plans amid a management shakeup.
Credit Suisse is initiating coverage on Nike with optimism, despite the firm's feeling that the company is experiencing cautious sentiment heading into the print.
The Analyst
Credit Suisse's Michael Binetti initiated coverage of Nike with an Outperform rating and $78 price target.
The Thesis
The Nike debate is focused on near-term metrics, including the potential that the company will lower fourth-quarter and fiscal 2018 guidance, Binetti said in a Wednesday note.
Over the next two quarters, Nike revenues will accelerate from strong running innovation — the Airmax, VaporMax and React platforms — a self-imposed pullback in basketball, ongoing international strength and a World Cup lift in the fourth quarter, the analyst said.
“Importantly, multiyear gross margin headwinds should start to roll off aggressively over the next two quarters (and provide earnings stabilizers as new innovation scales),” Binetti said.
Any signs that Nike's innovation is starting to work after two years of share loses will be damaging to the bear case, as the stock has a "very cautious" sentiment heading into the earnings release.
Price Action
Nike shares were down 1.3 percent in premarket trading Thursday.
Related Links:
Adidas Continues North American Tear With 31% Sales Growth
Nike's Innovation Pipeline Fuels Analyst Optimism Ahead Of Q3 Report, Despite Management Shake-Up
Photo courtesy of Nike.
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