Nike Shares Climb, Analysts React to Q3 Finish

While Nike Inc. reported a mixed end to Q3, with the industry leader missing Wall Street’s sales forecast but surpassing EPS estimates, analysts are unanimous in their optimism about the brand’s underlying strength.

Nike’s shares surged nearly 5 percent, to new high in early trading today, further supporting analysts’ positive sentiments about the brand.

Christopher Svezia, an analyst at Susquehanna Financial Group, told FN last week that while currency headwinds are expected to affect most American companies that export abroad, he expects Nike to remain resilient in Q4 and the year ahead.

“The currency-neutral [performance] — essentially taking out the FX rate change — should remain strong at many international brands like Nike,” Svezia said. “I think that is the important indicator of the underlying strength. Currency, as we’ve seen, can be volatile, so you could see it swing in the opposite direction in a short period.”

Sterne Agee analyst Sam Poser, in a note this morning, called the Beaverton, Ore.-based company “sacrosanct,” noting that the company is not planning “indiscriminate price increases in Europe” to offset the effect of the stronger dollar.

“Nike will likely continue to gain share worldwide due to ongoing product innovation and the massive dollars dedicated to [research and development], marketing and infrastructure,” said Poser. “Such investment is and will continue to be beneficial to Nike’s most prominent retailers, namely Foot Locker.”

B. Riley & Co. analyst Jeff Van Sinderen also sang the footwear company’s praises, adding that Nike “dominated in athletics.”

“Nike is amazing at product innovation. That’s their biggest driver,” said Van Sinderen.

Nike CEO Mark Parker said in the Q3 earnings conference call that his company delivered a strong quarter but added that the economic environment has posed challenges.

“Over the last three months, the macro environment has become increasingly volatile. Foreign currency headwinds have intensified. Product input costs continue to fluctuate, and the political landscape is evolving in many countries around the world,” said Parker. “This is the environment in which all multinational companies now operate, and Nike is not immune to it.”

What differentiates Nike, the CEO added, is that the company views economic challenges as “an opportunity to create further separation in the marketplace” through its “globally diverse portfolio of geographies, categories, brands, product types, and distribution channels.”

The company noted that its future orders in China and Europe, in particular, were solid.

Nike’s profits in Q3 increased 16 percent, to $791 million, or 89 cents per diluted share, compared with the year-ago quarter’s $682 million, or 75 cents per diluted share. Sales rose 7 percent (13 percent excluding currency changes), to $7.5 billion, compared with $7 billion in 2014’s Q3.

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