Nike (NKE) Q4 Earnings on Deck: What's in the Cards?

NIKE, Inc. NKE is, no doubt, a terrific business that has delivered great returns over a period of time. Over the past 35 years, it has generated returns of more than 25% for shareholders and has consistently paid dividends. Growing dividends reflect its solid financial structure, healthy underlying fundamentals and a stable business model.

 

Being a powerful brand, Nike has a long history of sales growth and has been dominating the athletic footwear and apparel industry for quite some time. In fact, Forbes currently considers Nike to be the No 1 apparel brand and the 14th most valuable brand in general. Nike has time and again taken the top spot in Piper Sandler’s annual teen survey for the best retail brand. And in recent times, for instance in 2019, Nike effortlessly dwarfed its competitors by generating sales worth $39.1 billion, greater than the combined top line of adidas AG ADDYY, Under Armour, Inc. UA and Lululemon Athletica Inc. LULU.

 

Consequently, investors are undeniably excited to see how Nike will fare in its fiscal fourth-quarter earnings results on Jun 25, after the closing bell.

 

Nike’s fiscal fourth quarter covers the month of March, April and May. Needless to say, that period has been impacted by the coronavirus pandemic which hammered economic growth worldwide and squeezed corporate profits. In fact, business activities took a beating due to lockdown measures put in place to curb the spread of the deadly virus. Nike had to close stores in places such as the United States and Europe, and such closures will certainly reflect on the company’s results.

 

But bullish analysts argue that even before the pandemic struck, Nike invested heavily in online sales and has ramped up efforts to reach consumers directly rather than relying on retail partners. Moreover, in China, Nike reopened stores last month which should contribute to its earnings. At the same time, shoppers have been willing to spend lately in spite of the economic upheaval. This got reflected in May’s when retail sales soared higher than expected and the clothing and accessories segment jumped a whopping 188% from April, according to the U.S. Department of Commerce.

 

However, let’s admit that the coronavirus outbreak and the subsequent social-distancing measures implemented for most part of the previous three months will certainly show on its results. After all, most of Nike’s wholesale partner stores remained closed since mid-March, leading to delayed shipments to wholesale customers, thereby affecting wholesale revenues and resulting in higher inventory. Markedly, its rivals including lululemon and Under Armour have witnessed a decline in sales of 17% through early May and nearly 30% through late March.

 

To make matters worse, National Basketball Association suspended the pro basketball season in March amid the coronavirus outbreak, something that doesn’t bode well for the country’s top sports apparel maker.

 

Analysts widely expect Nike’s revenues to come in at $7.26 billion for the fiscal fourth quarter, suggesting a decline of 28.7% from the year-ago period. Similarly, the company’s earnings per share is pegged at 2 cents, suggesting a decline of nearly 97% from the year-ago reported figure. Notably, the Zacks Consensus Estimate for its current-year earnings has moved 0.1% down over the past seven days.

 

 

 

What’s more, the Zacks Rank #3 (Hold) company has an Earnings ESP of -100.00%. Per our proven model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 increases the chances of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

NIKE, Inc. Price and EPS Surprise

 

NIKE, Inc. Price and EPS Surprise

NIKE, Inc. price-eps-surprise | NIKE, Inc. Quote

Discouraging earnings performance, without a doubt, leads to a decline in share price. The company’s earnings for the current year is expected to decline 17.7%. In fact, shares of Nike are down 1.2% year to date.

 

 

 

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NIKE, Inc. (NKE) : Free Stock Analysis Report
 
Under Armour, Inc. (UA) : Free Stock Analysis Report
 
lululemon athletica inc. (LULU) : Free Stock Analysis Report
 
Adidas AG (ADDYY) : Free Stock Analysis Report
 
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