Nike Inc NKE reported its fiscal 2017's third-quarter EPS ahead of expectations. The company’s revenue and EPS growth will likely decelerate over the next 12 months due to competition, Argus’s John Staszak said in a report. Citing elevated levels of international inventories and slowing revenue growth in Europe and China, the analyst added that Nike’s P/E multiple could rise modestly over the next several quarters.
Staszak downgraded the rating on the company from Buy to Hold. He recommended investors interested in consumer discretionary stocks to accumulate shares of Marriott International Inc MAR.
Competitive Landscape
Nike reported its FQ3 results, with 5 percent year-over-year growth in revenue at $8.4 billion. Operating EPS came in at $0.68, higher than the consensus estimate by $0.15. “In the third quarter, strong NIKE brand sales were overshadowed by efforts to clear inventories and unfavorable currency effects,” Staszak wrote.
The company’s revenue and EPS growth is likely to slow over the next 12 months, due to competition from adidas AG (ADR)ADDYY and Under Armour Inc UAA, the analyst stated, while adding that the industry has remained “fiercely competitive.”
The analyst lowered the EPS estimates for FY 17 and 2018 from $2.50 to $2.41 and from $2.80 to $2.65, respectively, to reflect significant currency headwinds and higher demand creation expense.
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