Nike (NKE) Will Continue to Beat Guidance - Sterne Agee CRT

Sterne Agee CRT analyst, Sam Poser, believes that Nike Nike (NYSE: NKE) has multiple triggers to pull to make or beat its guidance, including the timing of its market expansion, SG&A spending, and share repurchases. Current guidance is base case scenario, and assumes a margin hit in 3Q, as Nike works through excess inventory in North America. Future orders are up 20% (FX-neutral) which will likely pave the way revenue/EPS acceleration as we head into the Rio Olympics.

Future orders continue to accelerate from already strong levels. Global future orders on an FX-neutral basis are up 20% (+8% ASPs and +12% units), an acceleration from the +17% in 1Q16. There is FX neutral growth across all geographies and future orders in North America are up 14%.

China business continues to accelerate with no signs of economic pressures. FX-neutral revenue for China increased 28% in 2Q16 on top of +21% in 2Q15. Growth was driven by the Running, Sportswear, and basketball businesses. The apparel category, which for years was an impediment to growth, is starting to turn around, and increased 22% in 1Q16 and 15% in 2Q16.

Top-line growth has become highly profitable, with EBIT margin expanding 514bps in 1Q16 and +82bps in 2Q16. The growth of China is instrumental to EPS growth, as China has the highest EBIT margin rate of any other geography.

Continued innovations allow for customers' acceptance of price increases. The customer is clearly attributing value to all that Nike is putting in and around its products. Those improved product offerings usually warrant higher prices.

No change to Buy rating or $150 PT.

For an analyst ratings summary and ratings history on Nike click here. For more ratings news on Nike click here.

Shares of Nike closed at $131.85 yesterday.

You May Also Be Interested In

• Amazon.com (AMZN) PT Raised to $215 at UBS
• Merck (MRK) PT Raised to $143 at Truist Securities
• Pacific Premier Bancorp (PPBI) PT Lowered to $27 at Keefe, Bruyette & Woods