On Wednesday, JPMorgan adjusted its outlook on Adidas AG (ETR:ADSGN) (ADS:GR) (OTC: ADDYY) shares, increasing the price target from EUR250.00 to EUR260.00 while maintaining an Overweight rating. The revision follows Adidas (OTC:ADDYY)'s pre-release of its second-quarter results, which surpassed expectations and led to an upgraded forecast for the full year 2024.
Adidas reported a 16% year-over-year increase in Q2 sales, excluding its Yeezy brand, outperforming the JPMorgan estimate and consensus of 11% and the buy-side expectation of approximately 13%.
This sales surge, coupled with a robust gross margin of roughly 50.3% and well-managed operating expenses at around 45% of sales, resulted in a notable EBIT outperformance.
The analyst noted that the sales growth was particularly significant as it was driven by the core strength of the Adidas brand. This performance is seen as a validation of the company's recent organizational and strategic changes. Additionally, the sales increase was achieved alongside margins similar to those in the first quarter, despite varied early second-quarter reporting within the broader sector.
The upgraded full-year 2024 guidance provided by Adidas, in light of these results and the evidence of strong exit rates and continuing favorable gross margin trends, is considered conservative by JPMorgan.
The positive outlook reflects confidence in the brand's momentum and the effectiveness of the changes implemented over the past year, which have been bolstered by the contribution from recent football events.
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