Nike (NKE) is the largest global manufacturer of athletic footwear, apparel and equipment by sales volume, and competes with Sketchers (SKK), Adidas AG (ADDYY), Steve Madden (SHOO) and K-Swiss (KSWS) in the global footwear market. The company recently announced its Q3 2011 results. Although Nike's revenues increased 7% to $5.1 billion, the gross margin declined 110 basis points to 45.8% compared to same period last year. The decline in margin was basically because of higher product and freight costs.

We have highlighted these factors in our earlier note titled: Nike's Air Freighting Raises Questions on Inventory Management.

Nike, Inc. (NKE) is doing horribly this afternoon. As I write this, a quote of $77.51 is on my screen. That represents a drop of over 9% for the shares. Volume is huge. Hopefully many of you out there didn't do an earnings trade on this one.

How bad were the fiscal Q3 numbers? According to MarketWatch, net income of $1.08 per share was four pennies below the overall call by Wall Street. In addition, the potential for a weakening gross margin is said to have played a part in the sell-off.

Analyst Upgrades

• Siemens (SI) to buy from hold at Deutsche Bank.
• Diamond Offshore (DO) to market perform from underperform at FBR Capital.
• MeadWestvaco (MWV) to conviction buy from neutral at Goldman.
• TD AmeriTrade (AMTD) and Cabot Oil & Gas (COG) to buy from neutral at BofA/Merrill.
• Janus Capital (JNS) to hold from sell at Citigroup.
• Motorola Mobility (MMI) to buy from neutral at UBS.
• Frontier Communications (FTR) to neutral from underperform at Macquarie.
• Humana (HUM) to buy from hold at Argus.

Nike, Inc. (NKE) is the largest global manufacturer of athletic footwear, apparel and equipment by sales volume, and competes with Sketchers, Adidas AG, Steven Madden and K-Swiss in the global footwear market. It sells its products under several brands including Nike, Nike Golf, Converse, Cole Haan, Umbro, and Hurley.

We maintain a $77.52 price estimate for Nike's stock, roughly 13% below market price.

The Federal Open Market Committee (FOMC) meets again this week to review economic conditions and set monetary policy. On whether the Fed should end quantitative easing or extend it, Atlanta Fed chairman Dennis Lockhart recently said that the Fed should remain flexible given the rising energy prices, which could be a sign of coming inflation. Either at this meeting or the next, the Fed could signal that interest rates will rise as a hedge against inflation.

Inflation will also be the focus when the Department of Labor releases the Producer Price Index (PPI) and Consumer Price Index (CPI) this week. Back in January the core PPI (which excludes energy and food costs) had its biggest jump in two years, and the core CPI had its largest uptick in more than year, the second month in a row in which consumer prices jumped.

The past week's data-point-of-consequence for investors had to be investment decisions by Warren Buffett's Berkshire Hathaway (BRK.A).

Buffett ended positions in several stocks in the fourth quarter, including the Bank of America (BAC), Nike (NKE), Fiserv (FISV), Becton Dickinson (BDX), Comcast Corp. (CMCSA), Lowe's Co.s (LOW), Nalco (NLC) and Nestle (NSRGY), according to a filing, The Wall Street Journal reported.

Berkshire added to a holding of only one stock in the fourth quarter: Wells Fargo (WFC).

Analyst Upgrades

• Polo Ralph Lauren (RL) to buy from hold at Citigroup.
• Qualcomm (QCOM) to buy from neutral at Roth Capital.
• Walgreen (WAG) to conviction buy from neutral at Goldman.
• Rockwell (ROK) to outperform from neutral at Credit Suisse.
• Carnival (CCL) to buy from hold at Deutsche Bank.
• SunTrust (STI) and TD Bank (TD) to outperform from market perform at Keefe Bruyette.
• Hawaiian Electric (HE) to outperform from neutral at RW Baird.
• Essex Property Trust (ESS) to outperform from neutral at Macquarie.
• Amgen (AMGN) to neutral from underperform at BofA/Merrill.

Athletic footwear and accessory giant Nike Inc. (NKE) sold off in after-hours trading as investors reacted to weaker-than-expected future orders, despite posting better-than-expected earnings and revenues during the quarter.

Quarterly earnings were up 22% from the same period last year to $0.94 per share, versus analyst estimates for $0.88. Revenues were up 10% during the quarter to $4.84 billion, compared to Wall Street estimates for $4.80 billion.

Companies continue to file quarterly reports late in the season, and a few are poised to spread some early holiday cheer for investors this week. Analysts surveyed by Thomson Reuters expect strong earnings results from Nike (NKE), Bed Bath & Beyond (BBBY) and Darden Restaurants (DRI), among others. Here's a quick look (for more details, see the DailyFinance Week in Preview).

Analysts forecast Nike's fiscal-second quarter earnings to come in at 88 cents per share, a 13.6% increase from the same period of last year. The world's leading athletic footwear maker also is expected to post revenue of $4.8 billion for the three months that ended in November. That's 9.3% more than the same period a year earlier. Note that Nike's earnings have not fallen short of consensus estimates in the past five quarters.

Analyst Upgrades

• Google (GOOG) to outperform from neutral at Wedbush.
• Nike (NKE) to buy from neutral at UBS.
• Apollo Group (APOL) to market perform from underperform at FBR Capital.
• JDSU (JDSU) to overweight from neutral at Piper Jaffray.
• NetApp (NTAP) to overweight from equal weight and Verigy (VRGY) to equal weight from underweight at Barclays.
• RSC Holdings (RRR) to outperform from neutral at RW Baird.
• Exelon (EXC) to buy from hold at Jefferies.
• Aon (AON) and Willis Group (WSH) to outperform from market perform at Keefe Bruyette.
• BMC Software (BMC) to outperform from neutral at Cowen.

Nike (NKE) is performing wonderfully, which was evidenced by the company's blowout fiscal first quarter, which the company reported on September 23rd. Both EPS and revenue beat analysts' expectations.

Nike also reported that worldwide future orders for Nike footwear and apparel were up 10% compared to last year. This shows that the growth story at Nike remains intact. Investors clearly agree. The shares have risen 25% year to date.

Analyst Upgrades

• FBR Capital upgraded Franklin Resources (BEN) to outperform from market perform and raised its target price for shares to $127 from $105 to reflect its belief the company is well positioned in the current environment.
• UBS upgraded Nuance (NUAN) to buy from neutral and has an $18 price target on the stock. The firm upgraded shares based on valuation and believes the company could be an acquisition target.
• Morgan Stanley upgraded DryShips (DRYS) to equal weight from underweight and has a $5.50 target on the stock. The firm cites the firmer ultra-deepwater drilling market for the upgrade.
• Becton Dickinson (BDX) was upgraded to neutral from sell at Goldman.
• Edwards Lifesciences (EW) was upgraded to market perform at Rodman & Renshaw.
• Arkansas Best (ABFS) was upgraded to neutral from underperform at BofA/Merrill.