Zacks Investment Research upgraded shares of Nike Inc. (NKE) from UNDERPERFORM to NEUTRAL on October 18, 2012, with a target price of $102.00.
Based on better-than-expected first-quarter 2013 results, we have upgraded our long-term recommendation on Nike to Neutral. First quarter earnings of $1.27 per share ran past the Zacks Consensus Estimate of $1.12. Moreover, the superior demand for the Nike brand led to a 10% growth in the company's top line that also surpassed the Zacks Consensus Estimate. However, higher input costs as well as a mix shift towards low-margin businesses continued to weigh on the company's gross margin, which contracted 80 basis points to 43.5%. Beside the quarter's implications, we expect the sluggish discretionary spending and intense competition amid rapidly changing customer preferences to undermine Nike's future prospects. This shadow of darkness, which offsets the solid quarterly performance, keeps us on the sidelines.
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