Merrill upgraded Nike (NKE ) to near term strong buy from buy.
Analyst Virginia Genereux thinks 40%-plus gross margins are sustainable, giving better earnings per share visibility. She thinks investors still are underestimating the positive impact of currencies on revenues, and incrementally, gross margins, which she thinks they should begin to see in the first quarter.
Genereux thinks investor are recognizing that the international market is key here, and that they are growing more comfortable with the U.S. footwear and apparel business as being low-single-digit growers. She notes very strong cash flow and high quality EPS makes Nike especially appealing in this environment. Genereux sees $2.87 fiscal 2003 (May) EPS, and $3.20 for fiscal 2004. She has a $64 target.