Nike's Innovation Pipeline Fuels Analyst Optimism Ahead Of Q3 Report, Despite Management Shake-Up

Nike Inc NKE is set to report earnings after the close on Thursday, March 22, one week after competitor adidas AG (ADR) ADDYY announced another quarter of double-digit growth in North America.

B Riley Stays Neutral 

With Nike's promotional activity remaining high in North America, B RIley analyst Susan Anderson maintained a Neutral rating and $63 price target for the stock. 

“Given our expectation for continued NA pressure offset by strong new product launches, brand resonance and international growth, we believe NKE should deliver an in-line earnings result,” the analyst said. 

Investors will be closely monitoring updates on the performance of Epic React and Air Max 270, two major releases from the company in February; progress on Nike’s Triple Double strategy; and the innovation pipeline for the rest of 2018, according to B Riley FBR. 

Dicks Sporting Goods Inc DKS "noted its excitement" for Nike's 2018 innovation pipeline in the retailer's recent earnnigs call, Anderson said. 

B Riley’s annual footwear survey shows the overall outlook for athletic footwear remains strong, and Nike retained its No. 1 brand preference rating in both the basketball and running/casual categories.

Despite Management Shakeup, Buckingham Stays The Course

Nike’s management shakeup continues to be an unknown for the company, with Nike brand head Trevor Edwards abruptly announcing his retirement amid a recent workplace scandal, Buckingham analyst Eric Tracy said in a note. 

Buckingham maintains a Buy rating on Nike with a $75 price target ahead of the Q3 report. 

Tracy called the retirement a "surprise," as he was considered a contender to replace CEO Mark Parker.

The CEO is now expected to remain in the position until 2020, which should be viewed favorably, the analyst said. 

Adidas' recent strong performance is both a positive and a negative for Nike, Tracy said: it signals a healthy domestic athletic growth cycle, but adidas' continued momentum will also make it a "more formidable competitor," the analyst said.  

DA Davidson Encouraged By Innovation Pipeline

Nike is well-positioned to improve its earnings power during a period of retail turmoil by accelerating innovation, building stronger direct-to-consumer capabilities and streamlining its organizational structure, said D.A. Davidson analyst Andrew Burns. 

"Two significant headwinds to fiscal 2018 margin performance, FX and excess inventory, should be much more manageable in fiscal 2019," Burns said. "While management is unlikely to provide specific fiscal 2019 guidance, we expect initial commentary to be in line with current expectations." 

The analyst said he's upbeat about Nike’s new product releases, given the positive commentary and excitement from Dicks Sporting Goods Inc DKS and Foot Locker Inc. FL. 

Burns reiterated a Buy rating on Nike with a $78 price target.

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Photo courtesy of Nike.