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Nike reported much stronger earnings than expected after the close Thursday.  $NKE shook off controversary and concerns over Adidas growth in the U.S. with strong guidance going forward.

Nike Women Athlete

Earnings Beat Consensus Expectations

Nike fiscal third quarter adjusted earnings of $0.68 a share on revenue of $8.98 billion crushing the consensus for a 23.5% EPS fall to 52 cents on a growth in sales of 5% to $8.84 billion.

Regional Sales Breakdown

  • North America fell 6%
  • Asia and Latin America rose 13%.

Reaction Nike Inc NYSE: NKE

$64.63 ▲ 0.21 (+0.33%) March 23, 2018 Close 

After $67.22 High Prior To SPX Sell Off Friday


$NKE North American sales growth began slipping last May, when it posted flat results and in Q2 North America sales fell 5%. Adidas has been gaining it's US market share by with new and differentiated products, reacting quickly to market demand. CEO Kasper Rorsted outlined a clear strategy and the company saw it's sales surge 74% year-over-as of May. Both Nike and some analysts see Nike recovering in North America.

  NIKE Q3 18 Results


Nike CFO Andy Campion expects US sales to return to positive growth in the first half of 2019. Executives are optimistic that $NKE consistent release of new styles and colors for its popular VaporMax and Epic React models should support accelerated sales growth. 

Michael Binetti at Credit Suisse wrote a note Friday that "Several F3Q updates boost our conviction that Nike is finally poised to reverse 2 years of share losses," where he reiterated his "Outperform" rating with a $78 price target. In his note he said Nike's scaling of new products, positive sales growth guidance, as well as accelerating international momentum supports the "high quality" fundamentals that will precipitate $NKE's comeback.

This story has been updated after Nike reported earnings

Earnings Preview

February saw $NKE hit a high at $70.25 with Adidas' raised long-term profitability targets but sold off on controversary, just when the NFL fallout seemed to be behind it. Nike's North America performance is the key for this quarter.

Nike has been hampered by the probe into misconduct claims at Nike and the abrupt resignations of brand president Trevor Edwards and VP Jayme Edwards. Look for the conference call to be dominated by questions there.

There are a few potential positives> here for Nike. The obvious is stocks are trading off all time highs with risk concern at a high following the drama around the company. Another is weak earnings are expected, analyst already expect EPS to fall 23.5 year-over-year after they were marked down sharply after Q1. Within that revenue is projected to grow just 5% year-over-year.

The surprises at Dicks $DKS and Foot Locker $FL combined with holiday season optimism gives Nike a low bar to get over. With regard to the Nike controversy, we are deep into NCAA March Madness, excitment is strong, dramas are put in the back pocket for now. Nike women's apparel appears unaffected by these controversies also.

$NKE closed Friday at $65.92 and has a 52-week range is $50.35 to $70.25

Source: Nike, AlphaStreet

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