'The brand heat is undeniable.' What analysts are saying about the latest beat-and-raise at Adidas

MW 'The brand heat is undeniable.' What analysts are saying about the latest beat-and-raise at Adidas

By Steve Goldstein

Analysts drew sharp contrasts with Nike

German sportswear manufacturer Adidas reported another beat-and-raise quarter and analysts on Wednesday drew contrasts with Nike's struggling performance.

After the German stock market close on Tuesday, Adidas raised its full-year operating profit forecast to around EUR1.2 billion ($1.3 billion), versus EUR1 billion previously, on currency neutral revenue growth of around 10%, versus "high-single-digits" previously.

Adidas in January forecasted profits of just EUR500 million.

Adidas stock (XE:ADS) fell 3% on Wednesday, though the stock is up 25% this year.

Its preliminary third-quarter numbers showed its operating profit rose to EUR598 million from EUR409 million, on 14% sales growth excluding currencies as well as the impact from sales of Yeezy merchandise. The profit came in ahead of estimates, while the sales growth met them.

Deutsche Bank analysts led by Adam Cochrane said Adidas put to bed worries about inventory as well as margins, with the only question still unanswered about rising operating costs.

"The brand heat is undeniable. The question is whether the earnings momentum can carry on into FY25e and FY26e against higher expectations. We think there is enough in the tank," the analysts said.

RBC Capital Markets analysts led by Piral Dadhania said Adidas will be able to maintain double-digit growth rates into 2025, due to lower competition from the U.S.'s Nike $(NKE)$, strong brand momentum, and a proliferation of growth across categories.

"We expect Adidas to maintain double digit revenue growth in FY25E, noting Nike lack of strategy and near term product initiatives offers less competition," the analysts said.

JPMorgan's analysts led by Olivia Townsend said the results compare very favorably to the rest of the sector, in what they called the largest top-line outperformance of Nike in 15 years. "Our recent channel checks in Europe, sell-out data for North America and store visits/tours by our colleagues in China suggest ongoing strong momentum," they said.

-Steve Goldstein

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October 16, 2024 08:11 ET (12:11 GMT)

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