There Are A Lot Of Moving Parts To Understand In Nike's Q1 Results

Baird reiterated its Outperform rating on Nike Inc (NYSE: NKE) despite the company reporting a mixed first quarter performance with better-than-expected earnings offset by a disappointing gross margin.

"While the report is mildly disappointing, sentiment likely already reflected low expectations, and we remain optimistic that global brand strength and product/manufacturing innovation can support improvement as F2017 progresses, leading to a favorable risk/reward at current levels," analyst Jonathan Komp wrote in a note.

Komp noted that Nike's brand momentum appears healthy, particularly in Greater China, Western Europe. Nike continues to lead within Sportswear, Running, and Jordan brand, which generate more than 50 percent of global sales with sustained double-digit gains.

Related Link: Nike Is In The Midst Of A North American Correction

The analyst is optimistic on North America despite investors remain wary of competitive threats.

"While perceived competitive threats may remain top-of-mind for investors, we note: (1) much-improved inventory positioning (down year-over-year, with off-price cleaner); (2) intentional restrictions for futures (only +1%) which should lead to FQ2-Q4 revenue>futures (opposite of trend experienced last year)," Komp highlighted.

Kemp cut his F2017 EPS view to $2.35 (+9 percent; consensus $2.40) including second quarter estimated EPS of $0.43 (consensus $0.52).

"While the report may not satisfy recent investor concerns, with estimates/valuation reset lower, we see a favorable risk/reward as NKE proves its ability to inflect revenue/margin throughout F2017 (and NKE could be a meaningful buyer of its stock, too)," Komp added.

The analyst has a price target of $67.

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