ATML Earnings Action

Shares of Nike Inc. (NKE) have fallen considerably, erasing much of its pre-earnings announcement gains, dropping about 13.2% since reporting second quarter results last Wednesday. The footwear company did post $.80 a share in earnings, beating the analyst consensus slightly, but the 6% growth in revenue to $4.6 billion missed expectations slightly on weaker U.S. and European sales. And going forward, there was evident concern on the conference call that gross margins, which improved by 40 basis points to 44.7% would decline and that a climate of favorable currency conditions would no longer be there. Estimates for the full year have already come down for the full year to $3.78 from $3.98 just a month ago to reflect that. However, it should be noted that Nike continues to gain market share and future orders for December-April 2009 went up by 6%. Granted it was a bit tepid compared to the 10% future orders growth reported last quarter, but it’s nonetheless quite good in a global recessionary environment with still continued expansion in emerging markets – the Americas and Asia Pacific. Hence, if there is a strong retailer out there, it’s Nike. What’s also strong is it’s balance sheet which has enabled the company to increase its quarterly dividend by 9% to $.25 a share and institute a new $5 billion share repurchase program. Thus, the post-earnings “swoosh” lower seems a bit much, especially with the stock now trading at 12x earnings. Once again testing and holding above technical support at $47.50, Nike should move back above its 50-day moving average in short order.