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Nike earnings preview: Stock gains on store reopenings

The earnings calendar remains light for next week, allowing investors to closely monitor shoe giant Nike’s earnings that will be announced on Thursday afternoon, amid rising a rising stock price and store reopenings.

Nike’s business in China is critical to the manufacturer’s performance as its e-commerce business managed to offset some of the company’s performance during the global pandemic. Many analysts expect Nike to report earnings of 3 cents per share on $8.35bn in revenue during its fourth quarter.

“Nike’s advantages include innovation fueled momentum entering the pandemic, strategic investments in digital capabilities/app ecosystem, and balance sheet strength,” analyst Jim Duffy writes. “We see Nike shares as favorably positioned for both secular fitness/casualization trends and industry structural changes that benefit those with strong direct engagement with consumers.”

Nike shares

Nike’s fiscal third-quarter sales came in above estimates, but earnings fell short as a result of the pandemic. Many expect that Nike will emerge as one of the retail winners from the crisis as a result of its strong online presence.

Nike’s company said that it was starting to see recovery in China – news that saw Nike stock outpace the S&P 500’s climb from the market’s March 23 lows, up nearly 60%, as the sportswear giant’s stores are up and running again in China and are slowly start to reopen elsewhere.

Nike’s revenue jumped 5% last quarter, with digital sales up 36%. Although these results don’t include any coronavirus impact outside of China, the  Zacks estimates call for Nike’s fourth quarter revenue to tumble 23% from the year-ago period to come in at $7.84bn.

Although Nike shares are down more than 5% this year, the company’s increasingly higher margins, profits, and growth justify a high valuation, say some brokers.

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Galina Mikova

Galina is a Hubspot-certified Technical Writer with over 10 years of experience in working with Fortune 500, private investment, banking, FOREX and niche tech companies as well as crypto and blockchain startups. She has a solid background in FinTech and blockchain technology.