Morningstar

What's Driving Nike's North America Recovery?

Innovation and digital investments have allowed the wide-moat firm return to positive growth in the region.

Securities In This Article
Nike Inc Class B
(NKE)

We view wide-moat

Nike's momentum heading into fiscal 2019 gives us greater confidence in its full-year guidance--including high-single-digit growth (up from the midsingle to high single digits), gross margin expansion of 50 points or more (our preliminary model is coming out at between 70-80 basis points of improvement), and SG&A expense growth at the same pace of revenue--but also leaves the door open for upside opportunities. Over the next five years, our model is aligned with management's financial targets calling for high-single-digit annual top-line growth and midteens EPS growth. We're planning a modest increase to our $70 fair value estimate for the time value of money, and while we view shares as fairly valued, we still like Nike's growth/income balance (including a new four-year $15 billion share-repurchase program).

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About the Author

R.J. Hottovy

Sector Strategist
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R.J. Hottovy, CFA, is a consumer strategist for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He is responsible for consumer discretionary and staples research. He has covered the consumer sector as an analyst and director of global consumer equity research for Morningstar since joining the company in 2008, and specializes in a broad range of consumer categories including restaurants, footwear and apparel retailers, consumer electronics retailers, fitness clubs, home improvement and furnishing retailers, and consumer product manufacturers.

Before joining Morningstar, Hottovy was a director and senior stock analyst for Next Generation Equity and an analyst for William Blair & Co., specializing in a wide range of retail and consumer product companies. He also spent two years at Deutsche Bank, covering waste management, water utilities, and equipment rental stocks.

Hottovy holds a bachelor’s degree in finance and a second degree in computer applications from the University of Notre Dame, where he graduated magna cum laude. He also holds the Chartered Financial Analyst® designation and is a member of the CFA Institute and the CFA Society of Chicago.

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