As Nike Inc. readies for the release of its third-quarter earnings report this Thursday, market watchers continue to signal optimism about the brand’s strength — particularly in digital and China — amid otherwise uneven market trends.
“We are buyers of NKE heading into its F3Q21 report as we believe it is poised to show a solid [earnings per share] beat on strong demand trends coupled with a return to gross margin expansion, both of which benefited from strong product launches, decelerating rate of promotional activity, and an improving inventory position,” wrote BTIG analyst Camilo Lyon in a distribution note today.
Lyon further indicated his confidence that the brand will see “solid revenue gains” in digital and China and is projecting EPS of 77 cents per share versus consensus of 76 cents on sales growth of 11.5% versus consensus estimates for 9.1% (or $240 million more sales than consensus bets).
“We believe Nike is on a solid path to generating high teens EBIT margins as the digital acceleration strategy gains further traction and cost efficiencies are realized,” Lyon added, reiterating his “buy” rating on the stock and price target of $162.
Jane Hali & Associates LLC sang a similar tune in a March 8 note where the firm indicated it was positive on Nike for both Q3 and the long-term, citing an expectation that the brand will benefit from the holiday season and “pandemic tailwinds of consumers exercising and spending time outdoors.”
“We believe that Nike’s continued efforts to refine [direct-to-consumer] and strengthen partnerships with key retailers will boost top-line,” the analysts noted.
JHA went on to sound caution on store closures across Europe, which — like the United States — continues to grapple with COVID-19 setbacks, but said Nike’s efforts to boost omnichannel and digital should help offset declines.
JP Morgan analyst Matthew Boss kept his Q3 earnings forecasts in line with consensus but described a “solid Q4 opportunity on tap” for the brand. For the third quarter, Boss raised his Greater China revenue growth estimate to 45% — equating to a 41% two-year stack. And for Q4, he raised his EPS estimates to 70 cents per share versus consensus estimates of 52 cents on revenues up 82%, as Nike laps a 38% decline in revenues last year. He reiterated an “overweight” rating on NKE stock and a price target of $170.
When Nike reported second-quarter results in December, a greater demand for sportswear and its strength in the digital space led the company to better-than-expected profits and sales. The athletic apparel and footwear behemoth reported earnings of 78 cents per share for the three months ended Nov. 30, compared with the prior year’s EPS of 70 cents. Revenues climbed 9% to $11.2 billion — trouncing analysts’ bets of 62 cents in earnings per share and revenues of $10.56 billion.
Nike unveiled its Consumer Direct Offense in 2017, a strategy that amped up its connectivity to consumers via more direct selling as well as digital innovation. In 2020, it laid out the next phase of that plan, Consumer Direct Acceleration, which is focused on increased investments in e-commerce and technology, as well as a more simplified “consumer construct” of men’s, women’s and kids’ businesses.
According to a CNN poll of 32 investment analysts, the current consensus is to buy stock in Nike Inc. Their rating has held steady since February, when it was unchanged from a “buy.”
Nike reports third-quarter results after the market close Thursday. As of 12:45 p.m. ET today, its shares were in the green 0.3% to $145.42.