03:04 PM EDT, 06/27/2025 (MT Newswires) -- Nike's ( NKE ) Q4 report showed early signs of progress in its turnaround, with a stronger-than-expected sales outlook and improving execution, UBS Securities said in a note Friday.

"The main surprise was Nike's ( NKE ) Q1 revenue guidance," the firm said, noting it had forecast a 9% decline versus the company's mid-single-digit outlook.

UBS pointed to a 15% increase in Q4 demand creation expense as a sign that the company is refocusing on core sports and athletes, supported by better use of its athlete roster and the delayed launch of NikeSKIMS. It said recent leadership changes under new CEO Elliott Hill, who replaced 11 of his 15 direct reports, appear to be accelerating decision-making.

While Nike's ( NKE ) inventory levels are improving, the brokerage said risks remain, including uncertainty around whether fundamentals will continue to improve at the same pace and potential US tariff increases on Vietnam imports.

UBS estimates a 150 basis point gross margin impact if tariffs rise to 25%, but said Nike ( NKE ) appears better positioned to mitigate that risk than previously thought.

The firm raised its Fiscal 2026, 2027, and 2028 EPS estimates by 42%, 16%, and 2%, respectively, driven by a better sales outlook, improved gross margin resilience, and less fixed cost deleverage. UBS now forecasts fiscal 2026 earnings per share of $1.35.

The firm maintained its neutral rating on Nike ( NKE ) but raised its price target to $63 from $56.

Price: 71.72, Change: +9.18, Percent Change: +14.68