The FIFA World Cup 2018, kicking off in Russia on Jun 14, has a lot in store for the teams, players, sponsors as well as viewers. When speaking of the sponsors, NIKE Inc. (NKE - Free Report) is sure to grab a lot of attention through the month-long event, given its heavy spending to become soccer powerhouse since the World Cup 1994 held in the United States.
NIKE’s strategy has mostly been focused on acquiring sponsorships for various sporting events across the globe. The company benefits from this strategy, which is largely visible in its top-line performance. Further, the company has made significant progress on its Consumer Direct Offense strategy, positioning it for robust growth in the future.
These factors have collectively led shares of the swoosh brand owner to gain 18.5% year to date, outperforming the industry that grew 15.5%. The company’s performance graph is to a great extent influenced by strength in international business and the global NIKE Direct business.
Top and Bottom Line Reflect Strength
NIKE delivered top- and bottom-line beat in third-quarter fiscal 2018, marking the 23rd straight earnings beat. It has recorded an average surprise of 22.5% in the trailing four quarters. Further, revenues topped estimates in the trailing four quarters. The company’s revenues and gross margin also exceeded guidance, driven by the launch of products and innovation platforms that will scale over time. This resulted in double-digit revenue growth across international geographies, led by Greater China.
Further, it closed the third quarter with expectations of a trend reversal in its North America business in the fourth quarter, backed by the introduction of innovation platforms and differentiated customer experiences in the marketplace. Consequently, it provided robust guidance for fourth-quarter fiscal 2018 and initial view for fiscal 2019.
Strategies Supporting NIKE’s Growth
NIKE remains on track with its Triple Double and Consumer Direct Offense strategies, which position it well for strong global demand for athletic footwear and apparel. The company is building momentum across its operating regions by making the right product available at the right time and establishing a direct connection with consumers. Thus, the company is focused on the key aspects of its triple-double strategy - 2x innovation, 2x direct and 2x speed.
Powered by this strategy, the company is progressing on its Consumer Direct Offense by doubling innovation as it creates and scales new product platforms. Through 2x direct, it is strengthening the relationship with its customers by creating differentiated retail concepts, leading to mobile apps, dotcom and digital partners.
Lastly, with 2x speed, the company is focused on meeting consumer demand faster and delivering more relevant personalized products. Additionally, the company announced the acquisition of a leading data analytics firm, Zodiac Inc. This is likely to accelerate its Consumer Direct Offense strategy by contributing to the 2x speed factor of the plan. It targets serving customers faster and providing a more personalized experience across the globe with a particular focus on Nike+ members.
The above-mentioned factors clearly profess that NIKE has significant growth potential in the days ahead. This is also evident from this Zacks Rank #3 (Hold) stock’s Growth Score of A and long-term earnings growth rate of 9%.
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Better-ranked stocks in the same industry include Rocky Brands Inc. (RCKY - Free Report) and Deckers Outdoor Corp. (DECK - Free Report) , both sporting a Zacks Rank #1 (Strong Buy), as well as Iconix Brand Group Inc. , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Rocky Brands has a solid earnings surprise history with an average beat of 264.6% in the trailing four quarters. Further, the company has surged 51.3% year to date.
Deckers Outdoor has advanced 48.7% year to date. The stock has long-term growth rate of 12%.
Iconix Brand Group has delivered average positive earnings surprise of 188.2% in the trailing four quarters. Moreover, the stock has returned 6.9% in the past month.
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