NIKE Inc’s NKE scaled new 52-week high of $69.81 on Feb 26, closing slightly lower at $69.65. In fact, shares of the company have been gaining investors’ confidence for more than three years now owing to its spectacular surprise history. Additionally, NIKE’s robust growth and innovation initiatives have been fueling its quarterly results. Of late, strength at its International and global NIKE Direct Business also boosted the company’s performance.
In the past three months, the stock has gained 16.9%, outperforming the industry’s rally of 16.2%.
Let’s delve deeper to analyze the factors driving this Zacks Rank #3 (Hold) stock in recent times.
Growth Drivers
NIKE has been delivering positive earnings surprises for 22 straight quarters now, backed by its robust growth efforts and innovations. Moreover, it has delivered an average earnings surprise of 22.5% in the trailing four quarters. Also, revenues topped the Zacks Consensus Estimate in three of the trailing four quarters.
NIKE’s top line gained from persistent growth at international locations and global NIKE Direct business. A strong demand for the NIKE brand, along with solid growth in the Sportswear category and online business continue to aid results as well.
The company looks well poised to benefit from the rise in digital era through its Triple-Double strategy. It has gained success from the Triple-Double Strategy through focusing on doubling innovation, speed and direct connection with customers.
Meanwhile, NIKE unveiled a new company alignment, the Consumer Direct Offense, which focuses on using digital methods for rapid innovation and product development, along with strengthening consumer relations by operating through core regions.
Furthermore, the company has been focused on broadening its territory through the growth of e-commerce and NIKE Direct business. Additionally, NIKE is taking initiatives of selling directly to consumers on social media and e-commerce platforms which is evident from its deal with Amazon.com. It also announced plans to sell products directly to consumers through Facebook’s Instagram. We believe these actions will not only broaden the reach but also aid in boosting sales.
Moving ahead, the company remains confident about growth drivers like 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.
Concerns
NIKE has been struggling with lackluster sales trend in its key North American market, which remains a major headwind. Moreover, the company’s wholesale business in the region has been impacted by increased focus on online sales. The overall environment is likely to remain promotional in North America.
Additionally, the company’s strained margins and higher SG&A expenses are likely to weigh on results throughout fiscal 2018. These trends have also led the company to provide a cautious outlook about its overall performance. NIKE expects near-term results to be hurt by currency headwinds and a promotional retail environment across the United States.
Final Thoughts
NIKE’s VGM Score of B indicates that it is well on track with growth initiatives. Also, the company expects persistent strength in its international business to continue boosting results in near term.
Still Interested in this Space? Check These Stocks
Some better-ranked stocks in the same industry are Deckers Outdoor Corporation DECK, Carter’s, Inc. CRI and Skechers U.S.A., Inc. SKX. While Deckers Outdoor sports a Zacks Rank #1 (Strong Buy), Carter’s and Skechers carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Deckers Outdoor has an average positive earnings surprise of 96.4% for the past four quarters, with a long-term earnings growth rate of 11.6%.
Carter’s generated an average positive earnings surprise of 8.9% over the trailing four quarters. The stock has a long-term earnings growth rate of 10.3%.
Skechers has an average positive earnings surprise of 23.5% for the last four quarters. The company has a long-term earnings growth rate of 15%.
Zacks Top 10 Stocks for 2018
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2018?
Last year's 2017 Zacks Top 10 Stocks portfolio produced double-digit winners, including FMC Corp. and VMware which racked up stellar gains of +67.9% and +61%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2018 today >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment