Nike Shares Rise on Strong Earnings

Shares of Nike Inc. (NKE) climbed more than 7 percent to their highest level in more than a year Friday, after the world's largest athletic shoemaker posted a better-than-expected quarterly profit and several major brokerages raised price targets.

Beaverton, Ore.-based Nike Thursday posted earnings for the latest quarter that topped Wall Street estimates, thanks largely to a weak U.S. dollar and more robust overseas sales.

Lehman Brothers analyst Robert Drbul, who rated Nike "overweight," raised his price target to $68 from $62.

"Nike still has significant growth potential in several key international markets, most notably, Europe and Asia Pacific," Drbul wrote in a research note.

Nike shares closed up $4.25 at $61.50 on the New York Stock Exchange on Friday. The stock was trading near their highest level since April 2002.

Noelle Grainger, an analyst at J.P. Morgan, noted that Nike is more confident with its fiscal 2004 outlook, which looked conservative to her. She raised her price target to $65 from $60 and has an "overweight" rating on Nike.

"We believe Nike's first quarter results confirm that our thesis calling for a U.S. recovery in 2003, sustainable global growth and long-term margin expansion is beginning to play out," Grainger wrote in a statement.

Credit Suisse First Boston analyst Dennis Rosenberg, who rated Nike "outperform," raised his price target to $70 from $60.

On Thursday, the maker of Air Jordan (search) sneakers and Cole Haan (search) shoes said it earned 98 cents a share for the fiscal first quarter ended Aug. 31, above analysts' average estimate of 88 cents, according to Reuters Research, a unit of Reuters Group Plc.

Total revenue climbed 8.2 percent to $3.0 billion.

Gross margin rose by 1.6 percentage points from a year ago on leaner inventory, supply chain upgrade and better product mix, such as retro athletic jerseys and classic footwear.

Worldwide future orders rose 10.5 percent, while U.S. future orders, a closely watched figure in the industry, were down 3 percent, better than most analysts expected.

Future orders rose 28 percent in Europe, grew 19 percent in Asia and up 9 percent in the Americas.

Drbul had expected a 4 to 6 percent decline in Nike's U.S. futures.

Nike on Thursday told analysts in a conference call that it still expects full-year EPS growth in the mid teens, while revenue will climb in the high-single digit.

Rosenberg wrote in a note that Nike's sales at Foot Locker should turn up in the third quarter.

Nike's Chief Financial Officer Don Blair said in the call that its dialogue with Foot Locker Inc. (FL), the top U.S. athletic shoe retailer, was "much healthier today."

Nike, which has been in dispute with Foot Locker over such issues as pricing and promotions since December, also said it is trying to bring its high-end shoes back to the retailer, though no timetable had been set.

The company's shares have risen almost 20 percent in the past month.