Buy Nike (NKE) Ahead of Q3 Earnings? 'Just Do It' - Goldman

Nike, Inc. (NYSE: NKE) has been on a tear not only with the broader market in 2012, but really since the middle of 2011. Despite shares which are trading around an all-time high of $109.06, Goldman Sachs still thinks there's plenty of opportunity left for investors to grab a little bit of upside.

Heading into Nike's third-quarter 2012 earnings report on March 22nd, Goldman Sachs boosted its price target from $108 prior to a fresh $119 mark. The firm maintained its Buy rating.

Goldman said it doesn't expect too much in the way of earnings upside for Nike in the quarter, but there are several key drivers sitting in Nike's favor:

• Sales upside - Goldman anticipates 15 percent of revenue growth driven by gains in North America on easier comps and strong sell-through;
  
  
• Strong future orders - Goldman sees March-June future orders up in the mid-teen percentage. The gain will be driven by "robust February sell-through (particularly Basketball), the impact of Spring price increases, and the initial impact of some Olympic/NFL sell-in." Additionally, there may be additional positive impact from the 2012 Summer Olympics.
  
  
• Gross margins - For the quarter, Goldman sees gross margins coming in line with earlier expectations. The firm commented, "Beyond 3Q, price increases should begin to help IMU, and inventories should get under control just as NKE begins to anniversary higher obsolescence/close-outs. With NKE’s FY2012E gross margins 200bps below FY2010/11 (and their retail partners more profitable than ever), we see substantial upside to the FY13 consensus assumption of +90bps of improvement."

Goldman is modeling earnings of $1.16 per share during the third quarter, compared with Street expectations of $1.16.

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