What To Expect When Nike Reports Q3

Nike N7 Sneakers Native Americans
The Nike N7 Juvenate.
Courtesy of Nike.

Was Nike Inc.’s third quarter another consecutive win for the athletic footwear-and-apparel behemoth?

Only time will tell, but many market watchers seem pretty sure of the firm’s fate ahead of its third-quarter earnings release Tuesday.

In a Q3 preview note last week, titled “Nothing to fear — Nike’s business is healthy, the pipeline is robust, and guidance should be surpassed,” Sterne Agee CRT analyst Sam Poser maintains a bullish posture on the brand.

We are forecasting [diluted earnings per share] of 50 cents, which represents a 11.3 percent growth versus 3Q15, on revenue of $8.19 billion (up 9.8 percent reported, and up 14.4 percent FX neutral),” Poser wrote. “We are forecasting FX-neutral future orders to increase 13.4 percent. We view the 20 percent increase in 2Q16 future orders as an anomaly, and the reaction of the Nike stock reflects that. Any deceleration in FX-neutral futures should not be cause for concern.”

Average estimates peg Nike’s Q3 revenues at $8.2 billion and diluted EPS at 49 cents.

UBS Investment Bank analyst Michael Binetti also forecast a potenial EPS beat, noting he sees upside to his EPS estimate if 47 cents and Wall Streets estimate of 49 cents.

We’re forecasting a 17 percent [increase in FX-neutral] global futures but see upside given our strong checks, Summer Olympics and backweighted Q2 futures,” Binetti added.

Susquehanna Financial Group LLLP analyst Christopher Svezia was also upbeat, projecting $8.2 billion in sales and EPS of 48 cents.

We believe global growth will be supported by an important year for Nike on the innovation front, with new products and perhaps technologies launched around key events to foster future sales and market share,” Svezia wrote last week. “We reiterate our positive rating and $76 price target.”

While optimism appears to be the overwhelming sentiment, not everyone is singing Nike’s praises in the quarter.

Canaccord Genuity Inc. analyst Camilo Lyon maintained a hold rating on the brand’s stock, noting there were reasons to be cautious “despite Nike’s prowess.”

Among those reasons: increased competition in North America from Under Armour’s Stephen Curry releases; Adidas’s improved assortment, including the success of Kanye West’s Yeezy releases; and a sluggish response to Nike’s premium apparel introductions.

We are [also] wary of a potential deceleration in China as well as continued weakness in emerging markets such as Brazil and Russia,” Lyon added.