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Footwear and apparel giant NIKE, Inc. (NKE - Free NIKE Stock Report) concluded the first half of fiscal 2017 (year ends May 31, 2017) on a strong note. Specifically, the company earned $0.50 a share in the November quarter, which easily exceeded both our expectation of $0.44 and the year-earlier tally of $0.45. The retailer also surprised at the top line, with revenues totaling roughly $8.2 billion, compared to our $8.07 billion estimate. On a currency neutral basis, revenues would have increased 8%, year over year, with noteworthy gains recorded in North America, Western Europe, and the Greater China region. The news was not all rosy, though, as future orders grew just 2%, in constant currency, hurt by a 4% decline in North America.

On the bottom line, the company benefited from effective administrative cost management. In addition, roughly $900 million in stock buybacks aided per-share comparisons. These actions helped to mitigate a contraction in the gross margin, which narrowed by 140 basis points, to 44.2%, in the latest quarter. Foreign currency exchange headwinds and higher operating costs were to blame for the gross margin erosion.

Looking ahead, NIKE is now anticipating a high-single-digit advance at the top line for fiscal 2017. And, even though we expect the margin contraction to continue in the near term, we are raising our full-fiscal year earnings estimate for NIKE by a nickel, to $2.45 per share. NIKE stock, which had been the weakest performer in the Dow 30 thus far in 2016, is little changed on the November-quarter showing. Despite the difficult performance this year, we still think NIKE shares would make an excellent choice for conservative portfolios with a longer-term view. Appreciation potential to 2019-2021 is worthwhile. The stock has a below-the-market Beta and scores well for Price Stability, Earnings Predictability, and Growth Persistence. Also note the company's top-notch Financial Strength rating of A++.

About The Company:NIKE, Inc. designs, develops, and markets footwear, apparel, equipment, accessories, and services. It sells products to retail accounts, through NIKE-owned retail stores and the Internet, and through a mix of independent distributors and licensees in approximately 190 countries. Subsidiary brands include Converse casual sneakers and Hurley lifestyle apparel and accessories. 

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.