Nike
Nike Inc. is scheduled to announce fiscal third-quarter earnings on Thursday after the closing bell, about a week after two company executives resigned following workplace complaints.
Wedbush analysts led by Christopher Svezia said the announcements were “likely not a sign of business deterioration” and news that Chief Executive Mark Parker would stay at the iconic athletic gear company was a “positive.”
Parker said last week he would continue in his role beyond 2020. Elliott Hill will take on a new role as president of consumer and marketplace, responsible for Nike Direct, global sales, marketing and geographies.
That same day, The Wall Street Journal reported that Trevor Edwards, Nike NKE, -0.30% brand president, had resigned immediately and would retire from the company in August.
The following day, a second executive, Jayme Martin, vice president and general manager of global categories and a “top lieutenant” to Edwards, also resigned.
Stifel analysts are hopeful that steady leadership will help the company reach its business performance goals.
“The organizational changes appear aligned with operation strategies to become more consumer-centric and innovation driven,” analysts led by Jim Duffy wrote in a note published Thursday. “We remain optimistic for Nike’s North America turnaround and international and direct momentum and reaffirm our buy rating and $80 price target.”
However, some analysts are concerned about the company’s ability to reach its lofty business goals.
Nike has an average overweight stock rating and an average price target of $69, according to 37 analysts surveyed by FactSet. The stock traded last at about $66.
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Here’s what to expect:
Earnings: Nike is expected to report earnings per share of 53 cents, according to FactSet analysts, down from 63 cents last year.
Estimize, which crowdsources estimates from sell-side and buy-side analysts, hedge-fund managers, executives, academics and others, expects per-share earnings of 56 cents.
Nike has beat earnings expectations going back to at least March 2013, according to FactSet. Since September 2016, the company has beat earnings expectations by double-digit percentages.
Revenue: FactSet consensus is for revenue of $8.85 billion, up from $8.43 billion year-over-year.
Nike beat revenue expectations four of the nine previous quarters.
Estimize expects revenue of $8.88 billion.
Share price: Nike shares are up 3% for the last three months, and up 14.5% for the past year. The Dow Jones Industrial Average DJIA, -1.35% is up 1.5% for the past three months, and has increased 14.4% for the last 12 months.
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Other issues:
-Stifel analysts expect long-term growth from Nike.
“While North American fundamentals are challenged near-term we view the athletic category as having long-duration global secular and structural tailwinds,” Stifel wrote. “We see Nike uniquely positioned to execute to a more direct model which we expect translates to growth, margin improvement, and strengthening ROIC longer-term.”
-Wedbush analysts are bullish about new products, calling the “biggest standout” the Epic React, priced at $150 and released on February 22. Analysts think it has potential through fiscal 2019, including back-to-school.
“The cadence of new footwear styles are notably higher versus a year ago and the pipeline embraces more retro and casual silhouettes (Air 270, Shox Gravity, Epic React) versus largely a single technical style last year (VaporMax),” analysts wrote in a March 12 note. “At the same time comparisons are easing, particularly around key categories like basketball and in some aspects, returning to growth.”
Wedbush rates Nike shares outperform with a $74 price target.
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-Susquehanna Financial Group analysts say they will “remain on the sidelines” to wait for increased clarity, with the North American business still a question mark.
“[R]eaching the fiscal 2022 $50 billion revenue goal requires Nike to add over $4 billion in North American business, which will require a deft balance of scale and scarcity,” analysts led by Sam Poser wrote in a Friday note.
Susquehanna said the company is transforming into one that’s focused on innovation, digital capabilities and consumer expectations, but achieving the necessary results will be a tall order, requiring new products like the Epic React to reach high volumes.
“In the near-term, North America trends remain lackluster and it is unclear to us how quickly and to what degree Nike can execute a turnaround,” analysts wrote.
Susquehanna rates Nike shares at neutral with a $57 price target.