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It’s Time to Buy NIKE, Inc. (NKE)!

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On Thursday, March 21, global athletic apparel retailer NIKE, Inc. (NYSE:NKE) released its fiscal third-quarter earnings results after the closing bell. On Friday, the stock subsequently soared as investors reacted to the report, with shares closing up around 11%, just below a new all-time high. Nike has now climbed better than 15% in 2013, and around 11% over the last year.

NIKE Inc. (NKE)Strong Third-Quarter Results Could Trigger Breakout

The big move in the shares on Friday suggests that NIKE, Inc. (NYSE:NKE) may be setting up for a powerful breakout in 2013. This is a preeminent brand company with a terrific management team and a track record of creating value for shareholders. In the wake of the company’s most recent quarter, it’s time to buy Nike.

Overall, the report was very strong, although net sales were slightly below Wall Street estimates. Possibly the most intriguing part of the report was Nike’s growth by region. The company reported significant sales growth in North America while Asia was a weak spot.

Nike Reports Significant Momentum in North America

North American sales were up 18 percent to $2.5 billion whereas sales in China fell 9% to $635 million. Although at first glance, a drop in Chinese sales would appear problematic, investors poured money into the stock anyway. Why? Before answering that question, let’s take a look at the sales figures from other regions first.

Western Europe looked very good, recording a 8% sales increase to $1.0 billion and Central and Eastern European revenue was up 16% to $266 million. Emerging markets revenue was up 6% to $839 million, while Japanese sales fell 13% to $175 million.

The only real sore spots in regional sales trends were in Asia, while the company’s domestic business exploded in the quarter. Going forward, this is a very bullish set-up. First, the Japanese figures should be discounted, as sales in the country only accounted for less than 3% of total quarterly revenue.

China Sales Drop; No Need to Panic

Second, the slowdown in China won’t last — I’m willing to bet NIKE, Inc. (NYSE:NKE) will get this huge growth market right — and with North American sales surging, the future looks very bright for the Beaverton, Ore.-based apparel company.

Analysts were curious about the drop in China sales, which management had been warning about after torrid growth in that market in recent years. The company said that the setback was due to excess inventory and figuring out the preferences of Chinese consumers. Although it might take a quarter or two to get the strategy back on track, over the long-haul, Nike is going to make a fortune in China.

“What we see in China,” Nike Brand president Charlie Denson said, “it’s still a very robust marketplace. It’s still somewhere we believe in long-term.” The most recent quarter is likely a blip on the radar in Nike’s China strategy; the company said that future orders were up 4% in the region. In North America, future orders were up 11%, while they were down 5% in Western Europe, where the company just reported a strong quarter.

Third-Quarter Earnings Per Share Well Above Estimates

Overall, these numbers were very solid. Furthermore, NIKE, Inc. (NYSE:NKE) made a boatload of money in Q3, easily beating earnings per share estimates even though total revenue was a little light. The company reported income from continuing operations of $662 million or $0.73 per share, versus $560 million or $0.61 per share, last year. This compared to Wall Street consensus of $0.67 — a nice beat.

Revenue was up 9% to $6.19 billion from $5.66 billion in last year’s third-quarter. This came in just below analysts’ expectations of $6.23 billion, primarily due to the weakness in China.

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