Nike Still a Solid Play; Buy on Pullbacks

6/26 - "NKE remains our top apparel & footwear pick, w/ solid brands and continued outperformance in an environment generally lacking in visibility. W/shares indicating ~5% down after mkt, we think the pullback creates an attractive entry oppty. Reiterate Buy."

"Nike reported $0.98, which was above consensus of $0.96. However, if we back out the sale of Bauer, Nike reported $0.94. Top line growth was better than expected but SG&A grew close to 33%...Global futures (i.e. future product demand) of +11% (+8% ex f/x) were in-line w/ consensus, which we view as a positive in light of current macro challenges. Asia and the Americas posted particularly impressive futures growth of 30%+. Importantly, Nike starts to lap easier US comparisons beginning in Q1’09 (over a comp of 3% in Q1’08), which should benefit global futures in 2009."

"Mgmt reiterated FY09 revenue guidance of high single digit growth, which we also view as a positive in the current environment. However, Nike today guided $0.10 dilution from the recent Umbro acquisition in FY09, as the co. invests in the currently unprofitable brand’s long-term growth and corrects Umbro’s core UK business."

"We are adjusting our FY09 estimate slightly to $3.90 from $3.93 based on higher than expected SG&A spend. Our FY10 EPS estimate remains the same at $4.45. Our target price remains $78."