10:27 AM EDT, 06/21/2024 (MT Newswires) -- Nike's ( NKE ) plan to refocus on production innovation and brand building are likely to lead to a gradual rebound in its short-term financials, Oppenheimer said Friday

The athletic footwear and apparel maker has "struggled significantly" in the past several quarters amid a combination of "unfavorable external and internal hindrances," which have weighed "meaningfully" on sales growth and profit expansion, according to the brokerage. However, it now increasingly believes that multiples at which the company's shares trade and its near-term financial expectations are "largely de-risked" due to its ongoing turnaround efforts.

In December, Nike ( NKE ) outlined a plan to cut costs by up to $2 billion over the next three years, including simplifying its product assortment, increasing automation and streamlining the organization. "While early, we are impressed with new products and messaging from the brand, centered upon the upcoming Paris Olympics," Oppenheimer analysts led by Brian Nagel wrote in the note.

Oppenheimer maintained its estimate for Nike ( NKE ) to record per-share earnings of $0.84 for the fiscal fourth quarter ended May, with constant currency sales expansion of about 1%. The consensus on Capital IQ is for normalized and GAAP EPS of $0.84 and $0.83, respectively.

For fiscal 2025, Oppenheimer now forecasts the company to post EPS of $3.55, down from its previous estimate of $3.86, with currency-neutral sales down 3%. The Street is looking for normalized and GAAP EPS of $3.87 and $3.90 for the 2025 financial year.

Nagel expects Nike's ( NKE ) senior management to "further moderate" full-year guidance when it reports results later this month, due to the ongoing turnaround challenges and a difficult macroeconomic environment. "In our view, another guide lower is largely discounted in shares, and should position (Nike ( NKE )) for improving results, beginning (in the second half of fiscal 2025)," according to Nagel.

Oppenheimer upgraded its rating on Nike's ( NKE ) stock to outperform from perform and lifted the 12- to 18-month price target to $120 from $110. "Our now more constructive call on shares is generally intermediate to longer-term in focus," the brokerage said. "We are reinstating (Nike ( NKE )) as a top mega-cap pick across our coverage."

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