AP

Nike Rises on Earnings Report

Friday September 22, 3:05 pm ET

Nike Inc. Shares Climb Higher on Better-Than-Expected 1Q Report, Upbeat Analyst Commentary

NEW YORK (AP) -- Nike Inc. shares rose more than 4 percent on Friday, a day after the athletic shoe maker reported better-than-expected quarterly profit, solid sales and strong future orders.

Nike shares gained $3.92, or 4.8 percent, to $86.38 in afternoon trading on the New York Stock Exchange.

"The stock is up in our view because U.S. futures were strong, and gross margins for August were within management's expectations, versus a recent trend of missing expectations," Merrill Lynch analyst Virginia Genereux wrote in a client note. She maintained Merrill's "Neutral" rating on the company.

After Thursday's close, Nike reported first-quarter earnings of $377.2 million, or $1.47 a share, beating analysts' consensus view of $1.42 per share. Earnings for the quarter fell 13 percent from the year-ago period, due to stock options expense and marketing costs related to the World Cup tournament. Sales of $4.19 billion bested Wall Street's $4.16 billion forecast.

Future orders scheduled for delivery between September and January rose almost 6 percent to $5.2 billion from the year-ago period. The company did say gross profit margin declined to 44.1 percent from 45.3 percent, due to rising oil prices that lifted transportation costs.

"Futures orders were above our forecast, with U.S. remaining very strong," Bank of America analyst Benjamin A. Rosen wrote in note to investors. "While the athletic footwear environment has its challenges, we believe Nike's product pipeline should support continued market share gains in fiscal 2007."

Growth in domestic apparel, continued strength in Nike's core footwear lines like Air Max and Air Jordan, and success of a marketing effort with Apple Computer Inc.'s iPod music player will help the company gain market share, Rosen said.

Bank of America backed its "Buy" rating on the stock and $100 price target.