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Why Nike (NKE) Is Gaining Today

NEW YORK (TheStreet) -- Nike NKE was gaining 1.9% to $80.75 in after-hours trading Thursday after beating analysts expectations for earnings and revenue in the fiscal third quarter.

In its fiscal third quarter the shoemaker posted earnings of 76 cents a share, beating analysts' estimates of 72 cents a share by 4 cents. Revenue increased 12.6% from the year-ago quarter to $6.97 billion. Analysts surveyed by Thomson Reuters expected revenue of $6.69 billion for the quarter.

Revenue for the Nike brand of shoes was $6.6 billion for the quarter, up 14% from the year-ago quarter. Revenue from the Converse brand was $420 million, which is up 16% from the year-ago period. Nike sales saw growth in all geographic regions and key categories, while Converse sales were driven by growth in the U.S., U.K., and China.

"Our strong Q3 results demonstrate our relentless focus on delivering innovations that resonate with consumers," Nike CEO and president Mark Parker said in a press release. "Despite macroeconomic challenges, NIKE delivers consistent results because we focus on the biggest opportunities for growth while we manage risk across our diverse global portfolio. This is how we continue to drive long-term value for our shareholders."

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TheStreet Ratings team rates NIKE INC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate NIKE INC (NKE) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity and solid stock price performance. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Textiles, Apparel & Luxury Goods industry average. The net income increased by 39.8% when compared to the same quarter one year prior, rising from $384.00 million to $537.00 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 15.9%. Since the same quarter one year prior, revenues slightly increased by 8.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • NKE's debt-to-equity ratio is very low at 0.12 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, NKE has a quick ratio of 2.21, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Textiles, Apparel & Luxury Goods industry and the overall market, NIKE INC's return on equity exceeds that of both the industry average and the S&P 500.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 43.17% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, NKE should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • You can view the full analysis from the report here: NKE Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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