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NIKE (NKE) to Report Q4 Earnings: What's in the offing?

Zacks Equity Research

NIKE Inc. NKE is slated to release fourth-quarter fiscal 2020 results on Jun 25. In the last reported quarter, the leading sports apparel retailer delivered a positive earnings surprise of 44.4%. Moreover, its bottom line beat estimates by 20.1%, on average, over the trailing four quarters.

The Zacks Consensus Estimate for the company’s earnings for the fiscal fourth quarter is pegged at 3 cents, suggesting a decline of 95.2% from the year-ago reported figure. Notably, earnings estimates have declined 72.7% in the past seven days. The consensus estimate for fourth-quarter sales is pegged at $7.39 billion, indicating a 27.4% decline from the prior-year quarter’s reported number.

NIKE, Inc. Price and EPS Surprise

 

NIKE, Inc. Price and EPS Surprise

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

Key Factors to Note

During fourth-quarter fiscal 2020 (March-May period), NIKE almost fully resumed store operations in Greater China and South Korea, after a prolonged period of lockdown due to the coronavirus outbreak. In South Korea, about 95% of stores were operational as of May 14, with some working for limited hours. The company notes that in-store retail traffic in the locations has been gradually gaining momentum although it continues to be softer than the prior-year period.

Additionally, NIKE began gradually reopening stores in North America, EMEA and APLA as some states and countries are easing restrictions starting from the end of April and May. Consequently, NIKE reopened stores in more than 15 countries, including Germany, France, the Netherlands, Brazil and the United States. As of May 14, operations began in nearly 40% of stores in EMEA, 15% in APLA and 5% in North America. These included both NIKE-owned and wholesale partner stores. In the re-opened stores, the company has been undertaking safety protocols, including social-distancing rules, restrictions on store traffic, sanitization of products, distribution centers and facilities, and providing masks to employees.

Despite the resuming of operations in China and South Korea as well as partial openings in more than 15 countries, the company notes that most of the NIKE-owned and wholesale partner stores remained closed since mid-March through most of April. This resulted in delayed shipments to wholesale customers, leading to lower wholesale revenues and higher inventory. This is likely to have affected the NIKE Direct and wholesale businesses in North America, EMEA and APLA in fourth-quarter fiscal 2020.

Consequently, it recently stated that it will provide further updates during the fourth-quarter fiscal 2020 earnings call. Earlier, in its fiscal third-quarter report, the company refrained from providing any guidance for the fourth quarter and fiscal 2020.

Nevertheless, higher conversion rates and robust demand in the digital space have been catalysts during the fiscal fourth quarter. Management remains optimistic about consumers' increasing preference for a healthy lifestyle, which helped in maintaining the brand’s solid momentum in the fiscal fourth quarter.

Zacks Model

Our proven model does not conclusively predict an earnings beat for NIKE this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

NIKE has a Zacks Rank #4 and an Earnings ESP of -38.24%.

Stocks Poised to Beat Earnings Estimates

Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Helen of Troy Limited HELE currently has an Earnings ESP of +11.48% and it sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Netflix, Inc. NFLX presently has an Earnings ESP of +1.09% and a Zacks Rank #2.

Fastenal Company FAST currently has an Earnings ESP of +5.88% and a Zacks Rank #2.

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NIKE, Inc. (NKE) : Free Stock Analysis Report
 
Fastenal Company (FAST) : Free Stock Analysis Report
 
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