adidas AG (ADR) (OTCMKTS: ADDYY) preannounced its 2Q16 results, with revenue of €4.4 billion, representing a 21 percent
increase, ahead of the consensus forecast of a 19 percent increase.
Goldman Sachs’ Jamie Bajwa maintains a Buy rating on the company, with a price target of €139.70.
“The strong increase in currency-adjusted revenue growth in 2Q showed no slowdown vs. 1Q and represents the strongest brand
momentum seen by the company in over five years,” Bajwa mentioned.
2Q16 Preannouncement
Adidas preannounced an increase in gross margin and operational leverage, along with one-off benefits, which drove the EBIT for
2Q16 to €414 million.
The analyst believes the underlying margin improvement is a positive, especially given the robust growth margin performance
against a backdrop of U.S. dollar headwinds.
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Bajwa views these results as “another indication of the strong brand momentum enjoyed by Adidas and we continue to see strong
mid-term value creation potential in the business.”
Guidance Raised
In addition, the company raised its FY16 guidance, forecasting high-teens constant currency revenue growth, with EBIT margin of
c.7.5 percent and underlying net income growth of 35–39 percent year-on-year.
“We expect the positive preannouncement to be taken well and note that the revised guidance is 8 percent ahead of FY16 company
consensus,” Bajwa stated.
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