Why Nike Rival Adidas (ADDYY) Looks Like A Strong Buy Stock Right Now

Shares of Adidas ADDYY have cooled recently after an impressive two-year run. But the German sportswear giant looks like a strong buy at the moment as it continues to perform well against rival Nike NKE.

Overview

Adidas saw its second-quarter revenues climb 10% on the back of e-commerce strength, which popped 26% from the year-ago period. North American sales also jumped roughly 16%, while revenues in Greater China surged 27%.

Furthermore, Adidas brand revenues rose 12%, boosted by growth in the firm’s training, running, and football (soccer) units. Looking ahead, Adidas expects to continue to see strength in all of its key areas. CEO Kasper Rorsted recently detailed Adidas’ outlook on CNBC as the company prepares to release its Q3 financial results in early November.

Adidas’ CEO said the company isn’t likely to be impacted by the growing trade dispute between the U.S. and China because most of its Chinese manufacturing ends up in China. Rorsted also helped calm investor fears that its Yeezy line was fading after it pushed out recent models on mass, breaking the trend of building demand through limited releases. “So it's still going to be hard to get a very new Yeezy shoe from Adidas,” he told CNBC.

The German sports apparel firm has also seen its 3-D printed and its sustainable shoes perform well. The chief executive noted that demand continues to surge for Adidas’ Parley line, which is made from recycled ocean plastic. Plus, Adidas’ core soccer business is booming.

Outlook

Adidas’ biggest rival Nike has seen its stock price soar to new highs as it’s direct-to-consumer business grows. This helped it return to growth in North America the last two quarters. Plus, Nike has expanded its e-commerce partnerships, which includes deals with Amazon AMZN.

Yet, Adidas does not seem worried at all as it has positioned itself well, while seemingly leaving one-time challenger Under Armour UAA far behind. “We have still outgrown Nike, on a global basis but also in the U.S., but there is no doubt that Nike is coming back,” Rorsted said.

Looking ahead, Adidas is projected to see its quarterly revenues pop by 6.6% to hit $7.11 billion, based on our current Zacks Consensus Estimate. Adidas’ full-year revenues are expected to climb 7.4% to reach $25.99 billion.

Meanwhile, ADDYY’s adjusted quarterly earnings are projected to climb 13.4% to reach $1.78 per share. The company’s adjusted full-year EPS figure is expected to hit $4.83, which would mark roughly 22% growth. Investors should also note that Adidas has seen its fiscal 2018 and 2019 earnings revisions trend upward over the last seven days.  

Bottom Line

Adidas is currently a Zacks Rank #1 (Strong Buy) based on its recent positive earnings revisions. The company looks poised to grow both its top and bottom lines and perform well alongside not just Nike, but also in the athleisure market against the likes of Lululemon LULU and others.

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