On Oct 2, 2014, Zacks Investment Research upgraded athletic apparel, footwear and accessories retailer, Nike Inc. (NKE - Analyst Report) to a Zacks Rank #1 (Strong Buy), following the company’s splendid first-quarter fiscal 2015 results.
Why the Upgrade?
The sports gear giant posted better-than-expected first-quarter fiscal 2015 results accompanied by an encouraging guidance on Sep 25. Earnings of $1.09 per share for the first-quarter reflected an increase of 27% year over year and surpassed the Zacks Consensus Estimate of 88 cents by 21 cents.
Results were driven by an impressive top line, improvement in gross margin, lower tax rate and a decline in average share count. The company’s success in the quarter is mainly attributable to the improved sports gear sales during the soccer World Cup and the increasing trend of wearing fitness clothing outside the gym, which contributed to top-line growth.
Moreover, the company’s top line surged about 15% to $7,982 million and came ahead of the Zacks Consensus estimate of $7,804 million on the back of robust demand for its brands and significant growth in its main categories and all of its locations. Sales also jumped 15% on a currency neutral basis.
Following its strong start to fiscal 2015, the company came up with an impressive outlook for the upcoming quarter and fiscal 2015. Nike expects the rest of the year to display strength driven by momentum in sales and earnings per share as well as continued investment in growth strategies. This led to a drastic improvement in the Zacks Consensus Estimate for fiscal 2015 and 2016 over the last 30 days.
Estimate for fiscal 2015 grew 5.6% to $3.59 per share, while for fiscal 2016 it rose 5.1% to $4.12 per share.
Nike’s solid quarterly performance reflects its concentration on adopting innovations to keep up with customer preferences. In spite of macroeconomic headwinds, the company’s results remain impressive, backed by its continuous focus on utilizing growth opportunities along with efficient risk management. Going forward, Nike plans to follow these standards in order to enhance shareholder value in the long run.
Other Stocks to Consider
Other than Nike, stocks in the shoes and related apparel segment that are currently performing well include Brown Shoe Co. (BWS - Snapshot Report), Skechers USA Inc. (SKX - Analyst Report) and Iconix Brand Group Inc. (ICON). Of these, Brown Shoe and Skechers sport a Zacks Rank #1 (Strong Buy), while Iconix Brand carries a Zacks Rank #2 (Buy).
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