adidas “accumulate”

07/05/06 - AC Research

LONDON, July 5 (newratings.com) – Analyst Henning Wagener of AC Research reiterates his "accumulate" rating on adidas (ADS-EUR).

According to AC Research’s research note dated July 4 and published this morning, the company has reiterated its targeted results for the current fiscal year of 2006. The President of the Board, Herbert Hainer, stated in the "EURO am Sonntag" newspaper that the profit of the company would increase again in the current year. Last week, competitor Nike informed that its earnings had dropped last quarter, among other things due to high marketing expenses for the FIFA World Cup.

A similar effect can be excluded at adidas, according to the information provided by the Board. In the current year, the company will spend about 14% on advertising and marketing, which is about the same as in the last few years, the analyst says.

According to AC Research, the current fiscal year should also provide some very positive results. In this context, adidas will benefit massively from the ongoing FIFA World Cup. This year, the company plans to realize sales of about €1.2 billion with football items, the analyst says. The sales target wih respect to jerseys is 3 million, the analyst adds. In this context, the trend, according to which fans like to go see the matches in the shirts of their own national squads, has been confirmed, AC Research mentions. Moreover, adidas would probably be able to sell more than 15 million units of the "Teamgeist" football, which has been developed exclusively for the World Cup, the analyst says.

At the current share price of €38.50 and a 2006 P/E ratio of about 16, the company’s stock still seems to enjoy a rather moderate rating, the analyst mentions. adidas’s prospects are bright, the analyst adds. adidas has succeeded in concluding a sponsorship contract with UEFA for the 2008 European Championship, and will also equip referees and officials in this respect, and will furnish the ball, AC Research reports. On a short-term basis, however, it is crucial that the company succeeds in bringing about a rapid improvement of operations at Reebok, according to the analyst.

AC Research reiterates its "accumulate" rating on adidas.