3 Reasons To Buy Nike Shares Following Q2 Results

Nike Inc NKE reported its Q2 EPS ahead of expectation and maintained its FY 2017 guidance. “We feel better about the story today than we did yesterday,” Citi’s Kate McShane said in a report. She maintains a Buy rating on the company, with a price target of $60.

Nike posted its quarterly EPS at $0.50, above the Street’s expectation of $0.43. The beat was driven by lower-than-expected SG&A growth. Sales growth came in at 6.4 percent, in line with management guidance, “with NA [North America] footwear sales sequentially improving slightly on a two year stack and driven by DD [double-digit] growth in China and Japan,” McShane noted.

Management reiterated the FY 2017 guidance of high-single-digit sales growth and indicated that gross profit margin pressure would ease in the back half of the year, versus the first half.

Reasons To Buy Nike Shares

McShane mentioned three reasons for the Buy recommendation:

1. The signature basketball category would likely bottom.
2. Nike appears to be maintaining its global market share in a growing category.
3. Interest from “long only accounts” to buy Nike’s shares in the low $50s range.

“Over the long term, we remain confident in NKE’s global secular growth story, supported by stronger growth in Europe, China, Japan, and EM, positive growth in North America & supply chain innovation. Though other global brands are showing increased momentum, we think NKE has the scale & brand power to maintain share in still a growing category,” the analyst elaborated.