On Friday, CFRA made adjustments to its outlook on Nike Inc (NYSE:NKE), raising the sportswear giant's price target from $83.00 to $89.00, while maintaining a Hold rating on the stock. The revised price target is set at 25.5 times CFRA's fiscal year 2025 (ending in May) earnings per share (EPS) estimate, which is a decrease from the company's two-year average forward price-to-earnings (P/E) multiple of 28.9x.
The firm has adjusted its EPS estimate for fiscal year 2025 down by $0.25 to $3.50 and has introduced an EPS estimate of $3.75 for fiscal year 2026. Nike recently reported normalized earnings for the fourth quarter at $1.01 per share, surpassing consensus estimates by $0.17. However, the company's revenue for the quarter was $12.6 billion, slightly below the expected $12.8 billion.
Nike's performance in the fourth quarter varied by region, with North America seeing a 1% year-over-year decline, Europe, Middle East, and Africa (EMEA) experiencing a 2% decrease, while China's sales grew by 3%, and the Asia Pacific and Latin America regions each saw a 1% increase. The company's direct-to-consumer (DTC) revenues fell by 8%, whereas wholesale revenues rose by 5%. Additionally, Nike's fourth-quarter gross margin improved by 110 basis points year-over-year to 44.7%, attributed to lower freight costs and pricing increases.
CFRA's stance on Nike reflects confidence in the company's robust balance sheet, consistent capital returns, and the enduring appeal of its global brand to consumers. Despite these strengths, the firm advises caution due to the heightened competitive landscape in the industry.
In other recent news, Nike has been the subject of several adjustments by analyst firms, following its latest earnings report and updated financial forecast for fiscal 2025. The company's earnings per share of $1.01 exceeded expectations, however, the year-over-year revenue experienced a decline of 1.7%, falling short of the anticipated 0.5% increase. BMO Capital, TD Cowen, Williams Trading, JPMorgan, and Evercore ISI have all adjusted their price targets for Nike, with varying ratings.
The new guidance provided by Nike suggests a decrease in revenue for the first quarter, first half, and full year of fiscal 2025. However, Nike anticipates a rebound in its Lifestyle categories during the second half of the fiscal year. These recent developments have also impacted other players in the athletic apparel and footwear market, such as JD (NASDAQ:JD) Sports, Puma, and Adidas (OTC:ADDYY).
Analysts from Kepler Cheuvreux suggest that Nike's adjusted business strategy could present Adidas with an opportunity to expand its market share. Despite the challenges, Nike maintains its focus on innovation and strategic initiatives for future growth.
InvestingPro Insights
In light of the recent CFRA report on Nike Inc (NYSE:NKE), a deeper dive into the company's financial health and market performance using InvestingPro's real-time data and tips offers additional insights for investors. The current market capitalization of Nike stands at $117.78 billion, with a Price/Earnings (P/E) ratio of 25.25, reflecting investor sentiment and the company's earnings capacity. Notably, Nike's strong historical commitment to shareholder returns is highlighted by its impressive track record of raising dividends for 22 consecutive years, a testament to its financial stability and consistent performance.
InvestingPro data shows a modest revenue growth in the last twelve months as of Q3 2024, at 1.89%, with a gross profit margin of 44.3%, aligning closely with the improved gross margin reported in the recent quarter. These figures underscore the company's ability to maintain profitability and manage costs effectively. Additionally, Nike's strategy appears to be paying off as it trades with low price volatility, offering a degree of stability in a fluctuating market.
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