Nike delivered a surprise earnings gain for its second quarter late Tuesday and also beat on revenue. NKE stock soared above a key technical level Wednesday, leading the Dow's advance.
The Dow Jones footwear and apparel giant reported progress on efforts to clear out excess inventory, which has weighed on profit margins.
And its China sales rebounded further. The country's Covid-19 restrictions have continued to ease, freeing up more consumer activity in that key growth market.
More than a dozen analysts hiked price targets on NKE stock Wednesday, FactSet showed.
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Nike Earnings
Estimates: Analysts polled by FactSet expected Nike earnings to decline 22% to 64 cents per share vs. a year ago. Revenue was seen growing 11% to $12.581 billion.
Results: Nike EPS increased 2% to 85 cents, breaking a three-quarter string of declines. Revenue rose for a second straight quarter, up 17% to $13.3 billion. Revenue grew 27% on a currency-neutral basis. Online sales increased 25%.
In Q2, revenue grew 30% in North America and 11% in Europe and the Middle East. Nike's Q2 revenue fell 3% in China, improving from a 16% decline the prior quarter.
As of November end, inventories stood at $9.3 billion, up 43% from a year ago. That was an improvement over the company's $9.7 billion, up 44% vs. the prior year, reported at the end of August.
"Our growth was broad-based and was driven by our expanding digital leadership," CEO John Donahoe said in the Q2 Nike earnings release.
Outlook: Analysts project 3% revenue growth for Q3. They expect a 5% revenue gain for all of fiscal 2023, which is at the high end of Nike's low-to-mid single-digit guidance.
NKE Stock
Shares of Nike gapped up 12.3% to 115.89 Wednesday. NKE stock jumped above the 200-day moving average on the stock market today, after testing support at its 50-day line Tuesday.
Nike's Q2 earnings and revenue beat gave a to boost the major indexes Wednesday, as well as to rival footwear and apparel stocks. Skechers gained 4.2% Wednesday. Under Armour popped 4.5%, while Crocs climbed 8.5%. Ugg and Hoka brand owner Deckers Outdoor rallied 5.5% after four down days.
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Long-Term Growth Levers For Dow Stock
Some Wall Street analysts see a bright long-term growth outlook for Dow giant Nike. They say consumers around the world are leading more active lifestyles.
The Beaverton, Ore.-based company derives two-thirds of sales from outside the U.S. Analysts contend the company stands to benefit, over the long run, from its hefty exposure to emerging markets such as China, India and Brazil.
Amid Covid lockdowns, China sales have fallen in recent quarters. But they fell less in Q1 Nike earnings report, which ended in August, than in prior quarters, which Wall Street took as an encouraging sign.
"We expect sales will continue to rebound as Covid-19 restrictions lessen," Edward Jones analyst Brian Yarbrough wrote in a Nov. 15 note.
In Q2, inventories continued to grow faster than sales. "It could take several more quarters before inventories are more in line with sales," Yarbrough said.
Nike boasts strong cash flow. In November, the company hiked its annual dividend 11% to $1.36 per share. NKE stock now yields 1.3%.
