Analysts Offer Differing Views Ahead of Nike Inc (NKE) Earnings

Nike Inc (NYSE:NKE) will reports its Q1 earnings on Thursday, September 24, after market close. Analysts have varying opinions and estimates regarding the impending report. Let’s look at the opinion of two analysts: Christopher Svezia from Susquehanna and Sam Poser from Stene Agee CRT.

This week, Svezia has maintained a Positive rating on the stock while increasing his price target to $133 from $122 ahead of earnings. The analyst is optimistic due to Nike’s sustainable global growth and the improvements in its operating leverage.

Svezia estimates Q1 EPS at $1.21, which is above the street consensus of $1.19. Expansion of gross margin and some leverage in SG&A are factors contributing towards Svezia’s EPS estimates. However, he’s reminded that Q1 sales will be affected by foreign exchange and comparisons with World Cup, which boosted sales in this quarter last year.

He added, “That said, comparisons get better as the year progresses and we expect FY16 guidance to be reiterated at +MSD reported sales and +HSD-LDD earnings growth.” Svezia notes that historically Q1 has been very strong for the company.

On the other hand, not all analysts are so bullish on the athletic retailer. Sam Poser has maintained a Neutral rating on Nike’s stock. While he acknowledges Nike’s strong presence in the industry, he is concerned about the current economic situation in China and foreign exchange.

According to Poser, Nike’s growth rate faces the risk of going downwards because of factors like the current valuation, difficult comparisons with past periods, and the law of large numbers. He says, in the follow-up to 2016 Olympics, ”Nike will continue to spend aggressively, thus offering limited upside to current projections.” However, Poser has acknowledged that due to the company’s continuous innovation as well as expenses dedicated towards marketing, R&D, and infrastructure, Nike’s worldwide market share will continue to grow.

Due to FX and likely pressures from China, Poser has lowered his FY16 EPS estimate to $4.13 (from $4.76), and the FY17 EPS estimate to $4.04 (from $4.58).

Analysts continue to have mixed feelings about Nike. According to the 12 analysts polled by TipRanks in the last three months, 8 of them are bullish on the stock and 4 are staying on the sidelines. The average 12-month price target between the 12 analysts is $122.10, marking a 6% potential upside from current levels.

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