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Nike stock continues post-earnings surge; execs preview focus on womenswear

Shares in Nike Inc. are gaining nearly 7% in midday trade Dec. 21, one day after the sportswear giant upped its fiscal 2019 guidance on the heels of fiscal second-quarter earnings that were better than expected.

Shares were up 6.8% in midday trading Dec. 21 to $72.10 per share after Nike reported double-digit revenue growth that boosted diluted EPS for the quarter and caused executives to predict stronger revenue growth for the fiscal year than they previously expected. Shares began their rally Dec. 20 in after-hours trade.

Nike is betting on new products and promotions — particularly in fast-growing womenswear categories — to help drive that growth, executives and analysts said.

"The company sees a big opportunity in growing this business, along with international, digital, and apparel, by focusing on women in a more direct manner," Telsey Advisory Group analyst Cristina Fernández said in a Dec. 21 note to clients.

The Beaverton, Ore.-based Nike is supplying its branded gear for 14 of the 24 teams in the 2019 FIFA Women's World Cup in addition to continuing its "Just Do It" promotional campaign celebrating female athletes, Nike Chairman, President and CEO Mark Parker said during a Dec. 20 conference call with analysts.

"There's incredible momentum for women in sport right now as athletes, elite and every day, lead a movement of health and wellness, while driving a strong appetite for athletic footwear and apparel," Parker said.

The company is also launching a new tights line and a yoga collection that includes attire for men and women, Parker said.

Womenswear sales grew at a double-digit pace in the second fiscal quarter, outpacing menswear sales growth for the period, Nike CFO and Executive Vice President Andrew Campion said during the call.

But womenswear represents only about a quarter of Nike's total revenue, despite a market size that is about 50% larger than menswear, Nike CFO and Executive Vice President Andrew Campion said during a Dec. 20 conference call.

"We've got great momentum in the women's business, but we're chasing something much bigger," Campion said.

The focus on womenswear is a good strategic move, Needham & Co. analyst Rick Patel said in a Dec. 21 research note.

"Given the company’s expertise in innovation and marketing, along with strong brand ambassadors, we believe Nike is strongly positioned to gain market share," Patel said in the note.

Pivotal Research Group analysts on Dec. 21 upgraded Nike shares to a Buy rating from Hold, while J.P. Morgan also upgraded Nike stock to Overweight from Neutral.