Shares of Nike Inc. (NKE, Financial) fell 4.69% to $83.88 in after-hours trading on Thursday after the company released results for its third quarter of fiscal 2019.
Thanks to strong revenue growth and higher gross margin, the U.S. global footwear and accessories company beat consensus estimates by 3 cents on GAAP earnings, posting 68 cents per diluted share. The result cannot be compared with the loss of 57 cents that Nike recorded in the prior-year quarter due to effects from tax reform.
Earnings were dropped from revenue of $9.61 billion, which was a 7% growth year-over-year, beating consensus estimates by $10 million.
Year-over-year, revenues from the Nike Brand increased 12% in constant currency to $9.1 billion as a result of strong growth across all geographies, categories, Nike Direct, as well as double-digit growth in footwear and apparel.
Revenues for Converse decreased 2% in constant currency to $463 million, due to declines in American and European sales.
Nike also noted a 130 basis-point jump in the gross margin to 45.1% resulting from higher pricing and favorable exchange rates along with growth in Nike Direct.
The balance sheet had $4 billion in cash and securities, and $3.47 billion in total debt as of Feb. 28. The liquidity available decreased by about 21.4% from the prior-year quarter because the proceeds from the net income were more than offset by cash outflows for share repurchases, the payment of dividends and investments in fixed assets.
Under its four-year, $12 billion share repurchase program, that was completed in the third quarter of fiscal 2019, Nike bought back 9.8 million outstanding common shares for a total amount of $754 million.
During the third quarter of fiscal 2019, Nike also began the new four-year, $15 billion share repurchase program that the board of directors authorized in June 2018.
The share price was $88 at close on Thursday for a market capitalization of $138.51 billion. Following a 36% increase for the 52 weeks through March 21, the share price rose above the 200-, 100- and 50-day simple moving average lines. The share price at close Thursday was 39.2% above the 52-week low of $63.21 and just 0.65% off the 52-week high of $88.59.
Wall Street issued an overweight recommendation rating, meaning analysts expect the stock to outperform either the industry or the overall market. The analysts issued an average price target of $90.90, which reflects 3.3% upside from the closing price on Thursday.
In addition, the 14-day relative strength index of 64.9 suggests the stock is neither oversold nor overbought.
Disclosure: I have no positions in any securities mentioned.
