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NIKE (NKE): Is the Stock Positioned to Bounce Back in 2017?
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Calendar 2016 has been tough for leading athletic footwear and apparel retailer, NIKE Inc. (NKE - Free Report) as its stock price continued to decline throughout the year. The company’s shares have declined 16.9% year to date, significantly underperforming the Zacks categorized Consumer Discretionary sector’s growth of 7.3% in the same period.
This underperformance can be attributed to increased competition from bigwigs namely, Under Armour Inc. (UAA - Free Report) and Adidas AG (ADDYY - Free Report) , which hurt the demand for the company’s basketball shoes and casual footwear. Further, the waning ‘athleisure’ trend due to a shift in consumers’ tastes and preferences toward more fashionable assortments played foul.
The impact of these factors reflected well in the company’s top-line performance in the third and fourth quarters of fiscal 2016. Moreover, the company’s sluggish future orders throughout 2016 remained a drag on its performance. Additionally, foreign currency headwinds continued to hurt the company’s results as international sales continue to become a bigger part of its revenue stream.
However, NIKE has been putting up a tough fight against these odds, as is evident from the company’s better-than-expected top-line performance in the last two quarters. This is attributable to its constant innovations, efficient supply chain, a great sync between digital and physical worlds and strategic investments. Notably, the company’s second-quarter fiscal 2017 sales came on the back of eCommerce growth as well as a revival in its basketball shoes category. Further, the rebound in the basketball shoes category positions the company well to tackle competition from its peers in 2017. This speaks a lot about the company’s focus on setting things right, where they are not.
Want to find a winning consumer stock for 2017? Check out our new Zacks Top 10 Stocks for 2017, which is hand-picked from 4,400 stocks covered by the Zacks Rank. Be one of the first to see the 2017 list>>
Further, NIKE resorted to an effective tool to counteract the negative investor sentiment on the stock due to the recent slowdown in future orders. In this regard, the company decided upon discontinuation of reporting future orders as a stand-alone metric in its earnings release, effective the second-quarter fiscal 2017. It cited the growth in eCommerce and the non-inclusion of sales of its Converse brand, NIKE Factory Stores and shorter lead-time businesses as the primary reasons behind making this metric less relevant.
While this metric continued to impact the stock performance following fiscal second-quarter results, we believe its relevance on the company’s stock price will wane in the coming quarters as investors will go by the company’s view for this metric.
But, we cannot ignore the impact of currency headwinds, which is expected to persist and hurt second-half revenue forecasts. Consequently, estimates have been trending down. In the past seven days, the Zacks Consensus Estimate of $2.34 and $2.61 for fiscal 2017 and fiscal 2018 has decreased 1 cent and 3 cents, respectively.
Nonetheless, this Zacks Rank #3 (Hold) company’s earnings surprise history remains impressive, backed by its constant focus on capitalizing growth opportunities and efficient risk management. The company has delivered positive earnings surprises for 18 straight quarters, with an average surprise of 15.8% in the trailing four quarters.
Going into second-half fiscal 2017, NIKE remains confident of driving sustainable and profitable capital efficient growth over the long term. Consequently, the company reiterated its high single-digit revenue growth guidance for fiscal 2017, along with high single-digit to low double-digit currency-neutral revenue growth.
Bottom Line
Despite the struggles in 2016, we believe NIKE is steering its ship in the right direction with focus on innovations, customer demand, market share growth and strategic investments to boost shareholder values. However, going into 2017, NIKE will have to stay ahead of its competitors in order to retain its leading position in the U.S. footwear and athletic apparel industry.
With a long-term EPS growth rate of 13.8%, Francesca's Holdings has outperformed earnings estimates consistently in the last five quarters, with an average four-quarter beat of nearly 26.6%. Further, estimates for the current fiscal have witnessed an uptrend in the last 30 days.
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NIKE (NKE): Is the Stock Positioned to Bounce Back in 2017?
Calendar 2016 has been tough for leading athletic footwear and apparel retailer, NIKE Inc. (NKE - Free Report) as its stock price continued to decline throughout the year. The company’s shares have declined 16.9% year to date, significantly underperforming the Zacks categorized Consumer Discretionary sector’s growth of 7.3% in the same period.
This underperformance can be attributed to increased competition from bigwigs namely, Under Armour Inc. (UAA - Free Report) and Adidas AG (ADDYY - Free Report) , which hurt the demand for the company’s basketball shoes and casual footwear. Further, the waning ‘athleisure’ trend due to a shift in consumers’ tastes and preferences toward more fashionable assortments played foul.
The impact of these factors reflected well in the company’s top-line performance in the third and fourth quarters of fiscal 2016. Moreover, the company’s sluggish future orders throughout 2016 remained a drag on its performance. Additionally, foreign currency headwinds continued to hurt the company’s results as international sales continue to become a bigger part of its revenue stream.
However, NIKE has been putting up a tough fight against these odds, as is evident from the company’s better-than-expected top-line performance in the last two quarters. This is attributable to its constant innovations, efficient supply chain, a great sync between digital and physical worlds and strategic investments. Notably, the company’s second-quarter fiscal 2017 sales came on the back of eCommerce growth as well as a revival in its basketball shoes category. Further, the rebound in the basketball shoes category positions the company well to tackle competition from its peers in 2017. This speaks a lot about the company’s focus on setting things right, where they are not.
Want to find a winning consumer stock for 2017? Check out our new Zacks Top 10 Stocks for 2017, which is hand-picked from 4,400 stocks covered by the Zacks Rank. Be one of the first to see the 2017 list>>
Further, NIKE resorted to an effective tool to counteract the negative investor sentiment on the stock due to the recent slowdown in future orders. In this regard, the company decided upon discontinuation of reporting future orders as a stand-alone metric in its earnings release, effective the second-quarter fiscal 2017. It cited the growth in eCommerce and the non-inclusion of sales of its Converse brand, NIKE Factory Stores and shorter lead-time businesses as the primary reasons behind making this metric less relevant.
While this metric continued to impact the stock performance following fiscal second-quarter results, we believe its relevance on the company’s stock price will wane in the coming quarters as investors will go by the company’s view for this metric.
But, we cannot ignore the impact of currency headwinds, which is expected to persist and hurt second-half revenue forecasts. Consequently, estimates have been trending down. In the past seven days, the Zacks Consensus Estimate of $2.34 and $2.61 for fiscal 2017 and fiscal 2018 has decreased 1 cent and 3 cents, respectively.
Nonetheless, this Zacks Rank #3 (Hold) company’s earnings surprise history remains impressive, backed by its constant focus on capitalizing growth opportunities and efficient risk management. The company has delivered positive earnings surprises for 18 straight quarters, with an average surprise of 15.8% in the trailing four quarters.
NIKE INC-B Price, Consensus and EPS Surprise
NIKE INC-B Price, Consensus and EPS Surprise | NIKE INC-B Quote
Going into second-half fiscal 2017, NIKE remains confident of driving sustainable and profitable capital efficient growth over the long term. Consequently, the company reiterated its high single-digit revenue growth guidance for fiscal 2017, along with high single-digit to low double-digit currency-neutral revenue growth.
Bottom Line
Despite the struggles in 2016, we believe NIKE is steering its ship in the right direction with focus on innovations, customer demand, market share growth and strategic investments to boost shareholder values. However, going into 2017, NIKE will have to stay ahead of its competitors in order to retain its leading position in the U.S. footwear and athletic apparel industry.
Stock to Consider
A better-ranked stock in the same industry is Francesca's Holdings Corporation , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
With a long-term EPS growth rate of 13.8%, Francesca's Holdings has outperformed earnings estimates consistently in the last five quarters, with an average four-quarter beat of nearly 26.6%. Further, estimates for the current fiscal have witnessed an uptrend in the last 30 days.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>