Nike CEO change positive, guidance cut likely coming, says Morgan Stanley

After Nike announced that CEO John Donahoe will retire and that retired Nike veteran Elliott Hill will return to take over as President and CEO, Morgan Stanley finds change at the top to be a “positive announcement,” but also calls it “unsurprising in light of recent P&L volatility, guidance shortcomings, and a lack of strategic clarity.” The firm, which notes it had previously cautioned the negative EPS revision cycle may not be behind the business, now thinks a fiscal year guidance reduction is likely along with the company’s fiscal Q1 earnings report due on October 1 and wonders if Nike will cancel the investor day slotted for November 19 so that Hill has adequate time to assess the business, revise strategy and address the market at a later date. Morgan Stanley, which notes that Nike shares traded up 10% in the after-hours on this news, wonders about a “potential stock fade?” The firm keeps an Equal Weight rating and $79 price target on Nike shares.