Four Things Analysts Are Saying About Nike After Q3

Shares at Nike Inc. continued to trade lower Wednesday following the brand’s Q3 earnings report Tuesday.

Even though Nike beat earnings-per-share estimates, a slight sales miss — the firm reported sales of $8 billion, compared with estimates for sales of $8.2 billion — can take on a life of its own when you’re the global, athletic footwear-and-apparel leader.

Here are four things analysts are saying about Nike after Q3.

Sterne Agee CRT analyst Sam Poser

“Reiterate Buy. The Nike business remains very healthy. Reported revenue missed expectations due to a larger FX impact than anticipated. The inventory levels in North America will be normalized by the end of FY16. Initial FY17 guidance is a first look and is in line with Nike’s 5-year plan. The guidance is likely a base case scenario, and should increase as time proceeds.”

(Editor’s note: Nike CFO Andrew Campion said Tuesday during the Q3 conference call that he anticipates currency neutral revenue growth in the high-single to low-double digit range in FY17; reported revenue growth at a high-single digit rate due to continued strength of the U.S. dollar; and EPS growth at a low-teens rate. Campion said the firm would provide another update during the Q4 earnings call.)

Canaccord Genuity Inc. analyst Camilo Lyon

“Nike’s Q3 results were disappointing … Given the revenue miss coupled with futures orders that are becoming less of a predictor of reported sales, we believe the stock will be subject to multiple compression. Moreover, inventory levels in North America remain elevated, and we believe the soft Nike signature basketball business (LeBron and KD) is exacerbating this issue. We cannot ignore the likelihood that increased competition (from both Under Armour and Adidas) is resulting in share loss by Nike at retail. We maintain our hold [rating].”

(Editor’s note: Nike said its futures orders were up 12 percent over the same period last year. Excluding currency changes, futures orders would have increased 17 percent.)

Susquehanna Financial Group analyst Christopher Svezia

“While slightly disappointing, we believe the issues are not structural (i.e., supply chain) and we expect sales growth to accelerate in 1H17 given timing of orders and DTC sales. This continues being supported by strong currency neutral futures and building momentum in key international regions, including dominant China growth (up 27 percent currency neutral). We reiterate our positive rating given room for FY17 EPS to move higher as the year progresses due to continued pricing power, innovation and favorable inputs in an event year.”

Citi Research analyst Kate McShane

“Nike remains on the offense, posting robust Q3 EPS growth and futures. While top line growth underperformed our expectation by 200 basis points in Q3 and Q4 guidance is for mid-single digit growth, management highlighted growth in all geographies, an impressive 29 percent growth rate for DTC and maintained top line guidance for FY16. With higher inventory levels starting to clear in North America and new platforms for innovation in stores in the next few months globally, we expect better than guided top line trends next quarter.”

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