Nike Leads Dow After Rock-Solid Q2 Report: A Sell-Side Roundup

Nike Inc NKE shares are soaring higher in spite of overall market turmoil after reporting a big second-quarter earnings beat after the close Thursday.

The world’s largest sportswear company delivered earnings of 52 cents per share, beating estimates by 6 cents. Revenue came in at $9.4 billion, $240 million higher than estimates.

The Q2 print was the first earnings report that reflected Nike sales after the debut of its headline-grabbing ad campaign with Colin Kaepernick.

Kinahan: China Tariffs A Question Mark

TD Ameritrade’s Chief Market Strategist JJ Kinahan told Benzinga it's hard to dispute Nike’s strong performance.

“You can’t argue with amazing numbers. It’s really difficult to do that, and these were amazing numbers. I'm not that surprised it’s staying up, because it's hard to find fault there."

Nike's results have driven stocks like Dicks Sporting Goods Inc DKS and Foot Locker, Inc. FL higher, Kinahan said.

With China being one of Nike's strongest areas of growth, tariffs are the company's biggest threat, he said.

"Maybe Nike looked good today, but if we go to higher tariffs — one of the areas they grew significantly was China. How will that affect growth there? We just don't know."

UBS: Nike Offers Rare 2020 Commentary

UBS analyst Jay Sole said in a note that he remains bullish on Nike's fundamentals. The analyst maintained a Neutral rating on the stock and raised the price target from $77 to $78.

Nike hinted that fiscal 2020 looks on track, which Sole said is a rare move for the company.

“Even more unusual, Nike said it’s on track to hit calendar 2017 investor day five-year goals and outlined why it sees bigger potential longer term."

Wells Fargo: Nike's Strength A Readthrough For Retailers

Wells Fargo's Tom Nikic said Nike delivered a rock-solid quarter with no obvious holes to poke at, and said the only obstacle moving forward will be the ability to hurdle higher expectations.

The brand is narrowing the sales growth gap in North America and gaining market share in Europe, the analyst said.

Wells Fargo maintained a Market Perform rating on Nike and lowered the price target from $82 to $76.

Nike’s strong quarter is a positive development for Foot Locker, as the retailer is benefiting from a stronger Nike product assortment, Nikic said. Dick's s Sporting Goods was identified by Nike CEO Mark Parker as a strategic partner making great strides.

JPMorgan Issues Upgrade

JPMorgan's Matthew Boss said Nike is providing an attractive entry point after delivering a Q2 trifecta, with North American revenue beating Street estimates, China and EMEA accelerating on tougher compares and inventories looking healthy across geographies.

JPMorgan upgraded Nike from Neutral to Overweight and maintained an $85 price target.

BofA Sees Sales Pressure, Fashion Shift In China

Bank of America Merrill Lynch analyst Robert Ohmes is not sold on Nike’s strong performance and said he sees limited EPS upside heading into the second half of 2019.

The analyst expects Nike’s digital transformation to continue to pressure operating overhead and in turn limiting EPS upside.

Nike's sales outlook could remain pressured for the following reasons, Ohmes said:

• A challenging environment in EMEA.
• Growing market share pressures from alternative brands like VF Corp VFC’s Vans, Fila, Champion and adidas AG (ADR) ADDYY in apparel and footwear.
• A continued promotional environment in North America.
• A potential slowdown in China momentum tied to a fashion shift toward lifestyle and casual over performance brands.

BofA maintained an Underperform on Nike with a $55 price target.

Tigress Sees Upside Ahead

Tigress Financial Partners analyst Ivan Feinseth said Nike will continue to benefit from strong consumer spending in athletic apparel and footwear.

“I believe further upside exists from currently depressed levels and continue to recommend purchase.”

Morgan Stanley: Nike A Top Pick

Morgan Stanley analyst Lauren Cassel reiterated a bullish sentiment, calling Nike the firm's top pick. Morgan Stanley maintained an Overweight on Nike and $103 price target.

Nike’s direct-to-consumer transformation is underway, with 41-percent digital growth, revenue acceleration across all regions and an innovation pipeline still in the early innings, the analyst said.

Cowen: Nike Transcends Macro Issues

Cowen analyst John Kernan said Nike transcends the macro environment and is accelerating globally.

Cowen maintained a Market Perform rating and lowered the price target from $81 to $80.

Price Action

Nike shares were up 7.4 percent at $72.53 at the time of publication Friday.

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Photo courtesy of Nike.