On Wednesday, RBC Capital Markets adjusted its outlook on Adidas AG (ETR:ADSGN) (ADS:GR) (OTC: ADDYY), increasing the price target to €265 from €260 while maintaining an Outperform rating on the shares. The firm's decision follows Adidas (OTC:ADDYY)'s positive pre-announcement of its third-quarter 2024 results, which revealed a nine-month EBIT contribution that surpassed the full-year 2024 guidance expectations.
Adidas reported revenues that aligned with forecasts but showcased a better-than-anticipated underlying gross margin and EBIT, which was 6% above expectations. This outperformance was attributed in part to a positive contribution from the Yeezy line. As a consequence of these robust results, Adidas has raised its revenue and EBIT guidance for the full year 2024.
RBC Capital Markets anticipates that Adidas will continue to achieve double-digit growth rates into 2025, citing factors such as reduced competition from Nike (NYSE:NKE), strong brand momentum, and the expansion of growth across various categories, including Performance and Running. The firm's estimates for Adidas's financial performance in FY24E and FY25E remain modestly above the consensus estimates.
The revised price target of €265 reflects RBC Capital Markets' confidence in Adidas's ability to sustain its growth trajectory and capitalize on favorable market conditions. This optimism is underpinned by the company's recent financial achievements and strategic positioning in the competitive sportswear market.
In other recent news, Adidas AG has been making significant strides in the sportswear industry. The company has reported a 10% increase in third-quarter revenues, which equates to 6.4 billion euros, adjusted for currency fluctuations.
This growth is largely attributed to the success of its Samba and Gazelle terrace sneakers. Adidas has also been focusing on introducing new colorways and materials for these popular models. Bernstein analyst Aneesha Sherman predicts that Adidas will continue to gain market share over the next year.
RBC Capital has raised the price target for Adidas to €260 from €250, maintaining an Outperform rating on the stock. The firm anticipates Adidas will continue its robust revenue growth and gross margin momentum into the third quarter of 2024. RBC Capital's revised EBIT estimates for Adidas are now above the consensus among other market analysts.
Adidas also announced robust financial performance in their Q2 2024 earnings call. The company reported an 11% growth in currency-neutral sales and a 16% increase in underlying business. The company's EBIT nearly doubled to €346 million, showcasing a strong year-over-year growth. Adidas also raised its full-year guidance, anticipating high single-digit sales growth and an operating profit of around €1 billion.
InvestingPro Insights
Adidas's recent performance aligns with several InvestingPro Tips that offer additional context to RBC Capital Markets' optimistic outlook. According to InvestingPro, Adidas is expected to see net income growth this year, supporting the positive sentiment expressed in the article. The company's status as a prominent player in the Textiles, Apparel & Luxury Goods industry further reinforces its market position.
Real-time data from InvestingPro shows that Adidas has a market capitalization of $44.85 billion USD, reflecting its significant presence in the market. The company's revenue for the last twelve months as of Q2 2024 stood at $23.66 billion USD, with a quarterly revenue growth of 8.97% in Q2 2024. This growth trend aligns with RBC Capital Markets' expectation of continued double-digit growth rates into 2025.
It's worth noting that InvestingPro offers 11 additional tips for Adidas, providing investors with a more comprehensive analysis of the company's financial health and market position. These insights could be particularly valuable given the recent adjustments to Adidas's revenue and EBIT guidance for the full year 2024.
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