Nike’s Q4 Likely Shows Progress in the US — but Is There Hope for Its $50B Sales Target?

With projected gains for both its top and bottom lines driven by improved momentum in the U.S. and ongoing strength internationally, Wall Street sentiment is overwhelmingly positive on Nike Inc. ahead of its fourth-quarter earnings release Thursday.

“In North America, calendar 2018 began to see real progress on several fronts, from inventory management, product and engagement, that should translate into low- to mid-single-digit growth in FY19,” wrote Wedbush Securities analyst Christopher Svezia on June 14. “Outside the U.S. … Nike is likely taking share in Europe while sustaining double-digit growth in China.”

Consensus bets peg the Swoosh’s Q4 profits at 64 cents per share, a gain of 4 cents over the prior year’s same period. Meanwhile, overall sales are expected to grow 8.4 percent to $9.4 billion.

In addition to advances in North America, Cowen & Co. analyst John Kernan — who also raised his price target for the firm’s stock from $68 to $80 — said he expects Nike and Adidas to go head-to-head for the all-important back-to-school period.

“Nike trend is accelerating into [back to school] with improved sell through, increased average unit retail and improving merchandise margins on a tightly managed supply,” he wrote on June 19. “Checks indicate that Nike and Adidas are increasingly the universe but that Nike innovation and ability to leverage ‘90s portfolio heritage with Air Max and other offerings is driving a brand renaissance similar to Stan Smith popularity in ’16 and ’17.”

Still, Nike’s ambitious $50 billion revenue target released in 2015 continues to stir skepticism among some market watchers, who to view the goal as lofty — even after Nike extended the timeline from 2020 to 2022.

“Although many new product platforms are performing well and international growth is strong, Nike faces a steep climb to reach its $50 billion revenue target,” Susquehanna Financial LLLP analyst Sam Poser wrote on June 22. “Mid-single-digit growth in North America is a key component to hitting the $50 billion target. [However, visibility into whether Nike can grow North America at [that] pace, while keeping the brand sacrosanct, will likely not emerge until after 1Q19.”

Nike is scheduled to report results after the market close on Thursday.

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