Thursday, March 18, 2010

[morgan stanley] Americas Equity Morning Summary $NKE $USO

Companies Featured

NKE.N, NIKE, Inc. ($70.88) /Hitting an Earnings Stride

NKE’s earnings are inflecting at a faster-than-expected pace thanks to strong product execution, supply chain efficiencies, and a healthy supply/demand balance. Several positive surprises in F3Q10 (i.e. stronger apparel growth, healthier global demand, robust gross margin recovery) help drive a more constructive earnings outlook and we are raising our F10 and F11 EPS estimates to $3.85 and $4.55, respectively, from $3.71 and $4.29 (now forecast 18% earnings growth in F11 vs. the Street’s 11% estimate). We see a strengthening risk/reward profile for the stock (48% upside to a bull case vs. 22% downside to a bear case) and believe the company’s 5/5 investor day could be the next positive catalyst for the shares. We reiterate our OW rating.

Global Oil Fundamentals: Better Because of Maintenance

Oil market balances have continued to improve,
though we contend (again) that prices may be getting ahead of themselves. Inventories increased slightly ahead of the 5-year average in December; however, weekly data point to slight draws through February. We believe the market’s strength of late has been largely product-led. While product balances have undoubtedly improved, this improvement has resulted from reduced production, on lower refinery runs, and not demand. In the OECD, though stable, demand remains weak and still below year-earlier levels. With the added fillip of a colder-than-normal winter now fading, and refiners exiting maintenance, we doubt products will lend the support needed to keep crude prices at today’s elevated levels.

Americas Equity Morning

No comments:

Post a Comment