Ahead of Nike Inc.’s Q4 earnings report, due Tuesday, the brand’s recent stock pullback — down 14 percent quarter-to-date — has been under the microscope.
“Nike’s stock has been under pressure over the past several months on deceleration in North America futures, higher near-term inventories in the U.S. taking several quarters to work through, the health of the basketball business and a more competitive Adidas,” Citi Research analyst Kate McShane wrote on May 16.
Whether those issues will show up in the athletic giant’s fourth-quarter earnings report is the biggest concern for both investors and market watchers ahead of the release.
Cowen and Co. analyst John Kernan suggested last week that his confidence in Nike is weaning as he named Adidas Group his new top athletic-brand pick.
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“Our survey indicates Nike’s price perception declined in recent months while peers gained,” Kernan wrote on June 22. “Our math implies that [average selling price] outpaced [direct-to-consumer] contribution to Nike’s gross margin expansion by a ratio of 7:1 since 2014. International should help to offset domestic moderation while FX becomes a tailwind. We are trimming our [earnings per share] estimates and our price target is lowered to $65 from $70.”
Still, McShane, Kernan, Susquehanna Financial Group LLLP analyst Christopher Svezia and UBS Investment Bank analyst Michael Binetti all maintain buy-or-outperform ratings on Nike’s stock.
Consensus estimates peg the brand’s Q4 revenues at $8.28 billion, a 6.4 percent year-over-year improvement, while earnings per share are expected to decelerate 2 percent year over year, to 48 cents.
Global futures growth is also expected to decelerate from 17 percent in the last quarter — with McShane estimating 15 percent, Svezia predicting growth between 12 to 14 percent, Kernan forecasting a 12 percent gain and Binetti estimating 11 percent.
“While we acknowledge that not everything is humming along as it once was at Nike, recent concerns do not necessarily derail the long-term thesis or multiple, in our view, given Nike’s continued strong global growth rates (including North America),” McShane wrote.
As of 11:50 a.m. ET, Nike’s share price had slipped 1.4 percent, to $51.88.
