Yahoo Finance Nike Inc (NKE) Stock Still Has a Lot to Prove
Nike Inc (NYSE: NKE) stock jumped more than 4 percent on Friday morning after the company reported earnings and revenue beats in its fiscal third quarter and said its struggling North American business is off to a strong start in the fourth quarter.
However, analysts still see a tough road ahead for Nike and remain cautious on the stock.
Nike reported fiscal third-quarter adjusted earnings per share of 68 cents on revenue of $8.98 billion. Analysts had been expecting EPS of 53 cents on revenue of $8.85 billion.
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Overall, Nike reported a net loss per share of 57 cents due to a one-time tax loss of $1.25 per share under new tax laws.
North America was once again the problem child for Nike, with sales dropping 6 percent on the quarter. International sales growth was strong. China led the way with 24 percent sales growth. Sales in Europe, the Middle East and Africa were up 19 percent. Asia Pacific and Latin America sales grew 13 percent.
"As we close Q3, we now see a significant reversal of trend in North America, as momentum accelerates through the scaling of new innovation platforms and differentiated NIKE Consumer Experiences expand across the marketplace," CEO Mark Parker says.
In the company's earnings call, Parker addressed concerns about the company's workplace environment after the recent departure of brand president Trevor Edwards.
"I'm committed to ensure we have an environment where every Nike employee can have a positive experience...and reach their full potential," Parker says.
Looking ahead, Nike now expects positive U.S. sales growth in the first half of fiscal 2019.
Despite the earnings beat, analysts are still lukewarm on the stock.
"We like Nike's innovation pipeline, international runway, and long-term margin catalysts, but we remain on the sidelines until we see a positive inflection in [North America] and margins or a more attractive valuation," B. Riley FBR analyst Susan Anderson says.
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Bank of America analyst Robert Ohmes says Nike's preliminary fiscal 2019 revenue guidance of mid- to high-single-digit growth is a step back from the high-single-digit long-term growth the company projected at its Investor Day in October.
"We expect sales and earnings growth to decelerate on market share pressures and intensifying competition," Ohmes says.
B. Riley has a "neutral" rating and $68 price target for Nike. Bank of America has an "underperform" rating and $50 target for NKE stock.
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