UBS Forecasts Mid-teens Growth for adidas in Q2; Buy Reiterated

UBS Global Research expects adidas (ADS.F) to log mid-teens growth in the second quarter, saying the results are likely to reflect a continued acceleration in the sportswear company's momentum. In a second-quarter preview note published Thursday, the research firm said it forecasts sales of 6.68 billion euros for the three-month period, with an EBIT of EUR628 million. Margin is projected at 9.4%, reflecting higher investments during the World Cup. "While we think a deceleration in H2 versus H1 is broadly anticipated, the focus is likely to shift towards the sustainable growth level once the world cup tailwind fades. Encouragingly, based on our channel checks, Q2 momentum in running (UBSe ~12% of sales) and apparel (~35% of sales) should be sufficient to offset moderation in the Lifestyle segment, specifically Terrace (our base case has Developed Markets declining in H1 offset by growth in Emerging Markets), supporting the view that adidas can sustain its momentum beyond a typical two-year "boom" cycle," UBS noted. Adidas will report its second-quarter results on July 30. Analysts reiterated the stock's buy rating, with a price target of 219 euros.