Annual comparable sales were notably propelled by growth of 27% in the Americas and 26% in Europe, Africa and the Middle East. (Photo: 123RF)
What to do with Nike, BlackBerry and Well Health titles? Here are some recommendations from analysts likely to move prices soon. Note: the author may have a totally different opinion from that expressed by the analysts.
Nike (NKE, US$125.61): progress in inventory at the expense of margins
Nike has made progress in its quest to lower its inventory, but this progress has had a negative effect on its margins.
The American sports equipment manufacturer presented good results in the third quarter, beating in particular the expectations of Bank of America, but the financial institution is concerned regarding the mixed forecasts offered by the company for the fiscal year 2023.
Analyst Lorraine Hutchinson recalls that Nike presented earnings per share of US$0.79, far ahead of the US$0.54 forecast by Bank of America, while comparable annual sales were higher than expected (14% quarterly increase, 19% annual) compensated for lower gross margins.
Annual comparable sales were notably propelled by growth of 27% in the Americas and 26% in Europe, Africa and the Middle East, she underlines.
As for the forecasts for 2023, they are mixed, says Lorraine Hutchinson. Management raised its sales expectation by almost 10% (compared to regarding 5% previously), but the gross margin forecast fell to the low of the last announced spectrum.
Inventory indicators have improved, among other things with the increase in the dollar amount of annual inventory by 16% (+43% in the third quarter). Management believes it is in a position to reduce the number of units sold even more than expected and expects to end the year in a good position.
Lorraine Hutchinson believes this is an important message, but it is clouded by lower gross margin expectations. Bank of America’s forecast decline would now be 250 basis points in 2023, but up 200 basis points in 2024.
Bank of America increases its earnings per share forecast to US$3.22 for 2023 (+$0.16) and to US$3.95 for 2024 (+$0.10) as well as its target price for the stock from Nike, which goes from US$128 to US$135.
