Credit: Shutterstock photoInvestors should always be excited when a historically iconic brand presents a fresh buying opportunity, and that's exactly what we have right now with Adidas ADDYY . This legendary German athletic apparel maker is besting its competitors, dominating key markets, and soaring to new highs-and perhaps you should find out why.
Latest Earnings Performance
Less than two weeks ago, Adidas reported quarterly revenues of $6.04 billion, gaining 19% year-over-year and surpassing the Zacks Consensus Estimate of $5.84 billion. On a currency-neutral basis, revenues were up 16% thanks to strong performances from the company's Adidas (+18%) and Reebok (+13%) brands.
More importantly, net income from continuing operations climbed 30% to about $484.6 million, and Adidas reiterated its guidance that calls for this category to rise in a range of 18% to 20% throughout the year.
Segment Domination
The most impressive pieces of the company's recent success have been its specific segment results. Breaking it down geographically, Adidas sales rose 31% in North America and 30% in China, significantly outpacing the growth posted by top competitor Nike NKE in those regions.
The story here is two-fold. For one, Adidas did well in China, which will continue to be a major growth market for both Adidas and Nike. Furthermore, it bested its rival's growth rates in North America, Nike's home territory.
Adidas is benefitting from a massive ad push in the region, which was timed perfectly with a trend toward the retro styles the brand already masters, as well as a shift away from basketball shoes that has hurt Nike and Under Armour UAA .
Adidas also saw its e-commerce sales gain 53% in the quarter-an impressive feat for a company that could have been hurt by the continued slump at brick and mortar stores around the world. Earlier this year, Adidas said it was doubling its online sales target for 2020 to 4 billion euros.
Estimate Revision Activity
Of course, we at Zacks are always concerned about the stock's earnings estimate revision activity. Interestingly enough, this Zacks Rank #1 (Strong Buy) has seen mixed revisions for its current quarter, with one positive adjustment and one negative one coming in over the last 30 days.
Nevertheless, it is the other timeframes that look strong. Adidas has seen at least two positive revisions for its next-quarter, full-year, and next-year earnings within the last month.
On top of its strong Zacks Rank, Adidas also sports an "A" grade for Growth and a "B" grade for Momentum, lifting its overall VGM score to "B." Solid grades in our Style Scores system help to underscore the fundamental strength of highly-ranked stocks.
If Adidas can continue to match consumer trends and report impressive earnings results, the stock really could be set to break into a new range. This is one to keep an eye on for any investor interested in the consumer goods sector.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
