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Will Nike's Earnings Report Disappoint Investors?

Benjamin Rains
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Shares of Nike NKE have dipped 3.5% over the last four weeks in the lead-up to the sportswear giant’s Q3 earnings report date. And now, after the company announced that two of its top executives have stepped down, more investors will want to know what to expect from Nike in its soon-to-be-reported quarter.

Nike Brand President Trevor Edwards and VP Jayme Martin both resigned last week amid a code of conduct-related scandal. At this point there aren’t many details about what specifically happened, but investors should at least be relatively pleased to note that CEO Mark Park is now committed to staying in his role beyond 2020.

But investors might be less excited to find that Nike’s earnings are projected to plummet 23.5% from the year-ago period to $0.52 per share, based on our current Zacks Consensus Estimates. Nike’s 4.7% top line growth projection is also relatively minimal based on the company’s history.

Nevertheless, as many investors know, companies are often judged on whether or not they top earnings estimates—at least in the immediate aftermath of an earnings release.

With that said, Nike investors are in luck as our Zacks Premium customers can utilize the Earnings ESP Screener in order to search for stocks that are expected to miss. Zacks Earnings ESP (Expected Surprise Prediction) looks to find earnings surprises by focusing on the most recent analyst estimates.

This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.

A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.

Nike is currently a Zacks Rank #3 (Hold) and sports an Earnings ESP of -1.15%, which means earnings estimates have been lower directly ahead of NKE’s Q3 results. This means that despite the fact that Nike has managed to match or beat earnings estimates for 20 straight quarters, investors should consider the stock as one that could disappoint investors this week.

Nike is set to report its fiscal third quarter 2018 earnings results after market close on Thursday, March 22.

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