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Is NIKE (NKE) Poised to Grow on Strategic Initiatives?
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Beaverton, OR-based NIKE Inc. (NKE - Free Report) has been performing consistently driven by efficient supply chain, enhanced sync between the digital and physical experiences, constant innovations and strategic investments, all of which are likely to boost long-term shareholder value. Further, NIKE continues to seek opportunities for increasing global footprint, popularity and market share.
The benefits of these initiatives are evident from the company’s stock price movement, which increased 11.4% year to date, outperforming the Zacks categorized Consumer Discretionary sector’s growth of 8%.
Nike’s robust growth and innovation efforts have been reflected in every quarter’s results for over three fiscal years now, as the company delivered positive earnings surprises for 19 straight quarters, with an average surprise of 19.9% in the trailing four quarters.
In third-quarter fiscal 2017, the company’s earnings topped estimates and improved year over year. Earnings were fueled by sales growth, selling & administrative expense leverage, lower tax rate and decline in average share count, somewhat offset by a drop in gross margin. Further, a strong demand for the NIKE brand portfolio and eCommerce growth aided results. However, revenues fell short of estimates mainly due to the rise in competition for Nike’s basketball shoes in North America, which is the company’s largest market, and also the shifting retail backdrop.
NIKE has been unbeatable in the U.S. footwear segment for long, thanks to the popularity of its namesake and Jordan brands. However, the company is lately losing market share to Adidas AG (ADDYY - Free Report) and Under Armour Inc. (UAA - Free Report) given their schedule of new product launches and efforts to redefine brands. Further, the NIKE Brand’s future orders declined 4% on a reported basis and were down 1% on a currency-neutral basis.
Though the company is confident of delivering long-term growth, it provided a soft sales growth outlook for fourth-quarter fiscal 2017 owing to the aforementioned challenges. The company projects sales growth in the mid-single digit range in the fiscal fourth quarter, slightly short of the growth reported in the third quarter. While it projects solid sales growth internationally, it remains cautious on sales projections for North America. The company plans to tighten supply of newly released products in North America to maintain demand.
Consequently, the Zacks Consensus Estimate witnessed a downtrend. In the past seven days, the Zacks Consensus Estimate of $2.38 and $2.53 for fiscal 2017 and fiscal 2018 has decreased 6 cents and 5 cents, respectively.
While competition is a deterrent for the stock at the moment, we remain confident of its strategies. Looking into the future, the company has embarked upon a new “triple-double” strategy, focused on doubling the cadence and impact of innovation, doubling the speed to market, and NIKE’s direct connection to consumers in the marketplace.
With a long-term EPS growth rate of 13.8%, Steven Madden has returned nearly 7% year to date. Further, the company has an average beat of nearly 1.4% in the trailing four quarters.
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Is NIKE (NKE) Poised to Grow on Strategic Initiatives?
Beaverton, OR-based NIKE Inc. (NKE - Free Report) has been performing consistently driven by efficient supply chain, enhanced sync between the digital and physical experiences, constant innovations and strategic investments, all of which are likely to boost long-term shareholder value. Further, NIKE continues to seek opportunities for increasing global footprint, popularity and market share.
The benefits of these initiatives are evident from the company’s stock price movement, which increased 11.4% year to date, outperforming the Zacks categorized Consumer Discretionary sector’s growth of 8%.
Nike’s robust growth and innovation efforts have been reflected in every quarter’s results for over three fiscal years now, as the company delivered positive earnings surprises for 19 straight quarters, with an average surprise of 19.9% in the trailing four quarters.
In third-quarter fiscal 2017, the company’s earnings topped estimates and improved year over year. Earnings were fueled by sales growth, selling & administrative expense leverage, lower tax rate and decline in average share count, somewhat offset by a drop in gross margin. Further, a strong demand for the NIKE brand portfolio and eCommerce growth aided results. However, revenues fell short of estimates mainly due to the rise in competition for Nike’s basketball shoes in North America, which is the company’s largest market, and also the shifting retail backdrop.
NIKE has been unbeatable in the U.S. footwear segment for long, thanks to the popularity of its namesake and Jordan brands. However, the company is lately losing market share to Adidas AG (ADDYY - Free Report) and Under Armour Inc. (UAA - Free Report) given their schedule of new product launches and efforts to redefine brands. Further, the NIKE Brand’s future orders declined 4% on a reported basis and were down 1% on a currency-neutral basis.
Though the company is confident of delivering long-term growth, it provided a soft sales growth outlook for fourth-quarter fiscal 2017 owing to the aforementioned challenges. The company projects sales growth in the mid-single digit range in the fiscal fourth quarter, slightly short of the growth reported in the third quarter. While it projects solid sales growth internationally, it remains cautious on sales projections for North America. The company plans to tighten supply of newly released products in North America to maintain demand.
Consequently, the Zacks Consensus Estimate witnessed a downtrend. In the past seven days, the Zacks Consensus Estimate of $2.38 and $2.53 for fiscal 2017 and fiscal 2018 has decreased 6 cents and 5 cents, respectively.
While competition is a deterrent for the stock at the moment, we remain confident of its strategies. Looking into the future, the company has embarked upon a new “triple-double” strategy, focused on doubling the cadence and impact of innovation, doubling the speed to market, and NIKE’s direct connection to consumers in the marketplace.
Zacks Rank & Key Picks
NIKE currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the same industry is Steven Madden Ltd. (SHOO - Free Report) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
With a long-term EPS growth rate of 13.8%, Steven Madden has returned nearly 7% year to date. Further, the company has an average beat of nearly 1.4% in the trailing four quarters.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>