What Analysts Are Saying About Nike’s Q4 Performance Ahead of Its Earnings + Why China Is Key

Analysts expect Nike to produce solid quarterly results this week, reversing a net loss from a year ago when the coronavirus pandemic dramatically impacted results at the Swoosh and every other company.

According to Wall Street consensus estimates, Nike is poised to earn 51 cents a share in the quarter — which would compare with a loss of 51 cents a year ago — when the company reports its fourth quarter earnings Thursday afternoon. Revenues are forecast to hit $11.05 billion, versus $6.31 billion last year.

Citing the demand for Nike and Jordan products, in addition to limited supply that should help boost gross margins, analyst Sam Poser from Williams Trading said in a report released last week that he expects revenues to increase 76% to $11.1 billion, with sales in Greater China up 40%.

“Nike continues to take share and solidify its position as the most dominant athletic footwear and apparel brand in the world,” wrote Poser. “Digital prowess, best-in-class customer engagement, enhanced by increasing use of data, and unrivaled product innovation continues to accelerate, in the face of COVID-19 related supply chain disruptions in the U.S., and temporary store closures and reduced store hours in Europe, the Middle East and Africa.”

Poser, who rates Nike shares a “buy” with a price target of $189 per share, said he thinks recent concerns over China are overblown. “Our checks indicate that the Nike sales in China remain strong in the face of local China protests in reaction to many companies’ responses to human rights violations in the Xinjiang region,” he wrote.

Cowen Research analysts are slightly more worried about China, however. “Throughout its history Nike has always risen above controversy and difficult macro environments, but the situation in China is delicate,” the analysts wrote in a June 16 report. “We note that Baidu search interest for Nike has also fallen sharply since April.”

The Cowen analysts lowered their per-share target price on Nike to $145 from $155 but held their rating of “outperform,” or “buy,” on the stock. On Tuesday morning, Nike shares were trading at $132.12, up 1.6%.

Seeking Alpha analyst Brian Gilmartin said Nike has been “one of the worst Dow index performers this year.” The stock, he said, “peaked at $147 in early January 2021.”

Though it is tempting to buy at current levels, Gilmartin suggested that clients wait to hear Nike’s guidance for fiscal year 2022 before purchasing the stock.

For their part, the Cowen analysts said they think the fourth quarter has upside potential, and the analysts raised their earnings-per-share estimate for the fourth quarter by 2 cents to 60 cents.

“Continued robust digital trends and prospects for improved inventory flow in North America should all favor Nike’s topline and margin prospects in the fourth quarter,” the Cowen analysts wrote, also noting that the quarter is up against the weakest sales comparables of the pandemic from May 2020.

For the year, analysts’ consensus is for Nike’s EPS to reach $3.14 and revenues at $43.26 billion. A year ago, Nike posted annual revenues of $37.4 billion and EPS of $1.60.

Looking ahead, “The improving macro setup with wider vaccine distribution and further stimulus in the form of the Child Tax Credit, along with a return to in-school learning and team sports for this back to school season should provide significant demand drivers for Nike’s business,” Cowen Research wrote.

In the second half of 2021, port congestion is expected to ease, analysts said, along with more widespread vaccinations against COVID-19. In addition, several events this summer, such as the Tokyo Olympics in July and the UEFA Euro Football Championship in June and July should help bolster sales.

Gilmartin commented that the Olympics will likely benefit the brand and “may well turn out to be another giant Nike commercial.”

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