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Here's How NIKE (NKE) is Placed Just Ahead of Q3 Earnings
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NIKE Inc. (NKE - Free Report) is slated to release third-quarter fiscal 2024 results on Mar 21. The leading sports apparel retailer is likely to have witnessed year-over-year declines in the top and bottom in the fiscal third quarter.
The company has been gaining from its Consumer Direct Acceleration strategy, along with strong demand, compelling products and robust performance in its digital and DTC businesses. Supply-chain constraints, continued weakness in Greater China and higher costs have been weighing on its bottom-line performance.
The Zacks Consensus Estimate for fiscal third-quarter revenues is pegged at $12.3 billion, suggesting 0.8% decline from the year-ago quarter’s reported figure. The Zacks Consensus Estimate for the company’s fiscal third-quarter earnings is pegged at 70 cents per share, indicating a decline of 11.4% from the year-ago reported number. Earnings estimates for the fiscal third quarter have declined 2.8% in the last 30 days.
In the last reported quarter, the company delivered an earnings surprise of 22.6%. Its bottom line beat the consensus estimate by 25%, on average, over the trailing four quarters.
NIKE is expected to have witnessed continued gains from brand strength, robust consumer demand and an innovative product pipeline in the fiscal third quarter. Gains from its Consumer Direct Acceleration strategy, and robust digital and DTC performances are expected to have been other tailwinds.
Continued strength in retail traffic trends within NIKE Direct has been boosting conversion rates. The strong member buying trends are likely to have led to a record digital performance in the to-be-reported quarter. Strength in the North America, EMEA and APLA regions, fueled by increasing traffic, higher conversion and growth in average order value, is likely to have aided sales in the to-be-reported quarter.
The NIKE Direct business has been benefiting from robust growth across regions and an efficient digital ecosystem, which comprises its online site, and commercial and activity apps. Revenues at NIKE-owned stores are expected to have gained from improved traffic, higher conversion rates and growth in average order value. The NIKE Direct business is likely to have benefited from growth in North America, EMEA and APLA, offset by continued weakness in Greater China in the to-be-reported quarter.
We expect total NIKE Brand revenues to increase 1.5% year over year to $11,748.2 million in the fiscal third quarter, driven by a 0.8% rise in the Wholesale business.
On the last reported quarter’s earnings call, management stated that it expects strong gross margin execution and disciplined cost management to offset soft second-half revenues and drive earnings growth.
However, NKE has been witnessing a decline in the gross and operating margins due to rising costs, higher markdowns, increased freight and logistic costs, elevated input costs, and currency headwinds. Also, elevated SG&A expenses are concerning.
On the last reported quarter’s earnings call, the company predicted 160-180 bps improvement in the gross margin for the third quarter of fiscal 2024, driven by gains in strategic pricing, improved markdowns and lower ocean freight rates.
We expect gross profit to increase 3.2% year over year in third-quarter fiscal 2024, with a 160-bps expansion in the gross margin to 44.9%.
NIKE has been witnessing elevated SG&A expenses, driven by increased demand-creation expenses due to the normalization of sporting activities and overhead costs related to higher wages. Demand-creation expenses are likely to have increased in the fiscal third quarter, owing to elevated marketing and advertising investments. These investments are likely to have supported significant global sports moments and product launches, and investment in capabilities to transform NIKE's operating model for greater speed and effectiveness.
Operating overhead expenses are expected to have resulted from higher wage-related expenses and NIKE Direct costs, as well as increased technology investments to support digital transformation in the to-be-reported quarter.
We expect demand-creation expenses to increase 9.6% year over year and operating overheads to rise 2.1% year over year in the fiscal third quarter.
Driven by the gross margin growth offset by higher SG&A expenses, our model suggests a 20-bps expansion in the operating margin to 11.6% in the fiscal third quarter.
Zacks Model
Our proven model conclusively predicts 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
NIKE has an Earnings ESP of +5.21% and a Zacks Rank of 3.
Other Stocks Poised to Beat Earnings Estimates
Here are some other companies that you may want to consider, as our model shows that these also have the right combination of elements to post an earnings beat.
PVH Corp. (PVH - Free Report) currently has an Earnings ESP of +1.23% and a Zacks Rank of 2. The company is expected to register bottom-line growth when it reports fourth-quarter fiscal 2024 results. The Zacks Consensus Estimate for PVH’s quarterly revenues is pegged at $2.4 billion, which suggests a decline of 3.3% from the figure reported in the year-ago quarter. You can see the complete list of today's Zacks #1 Rank stocks here.
The consensus estimate for PVH’s bottom line has moved up 0.6% in the last 30 days to $3.49 per share, which suggests growth of 46.6% from the figure reported in the year-ago quarter. PVH has delivered an earnings surprise of 18.9%, on average, in the trailing four quarters.
Carnival Corp. (CCL - Free Report) currently has an Earnings ESP of +6.26% and a Zacks Rank of 2. The company is anticipated to register top and bottom-line growth in fourth-quarter fiscal 2023. The Zacks Consensus Estimate for CCL’s quarterly revenues is pegged at $5.4 billion, suggesting growth of 22% from the figure reported in the year-ago quarter.
The Zacks Consensus Estimate for Carnival's quarterly loss per share has narrowed by a penny in the last seven days to 17 cents per share. The consensus mark suggests 69.1% growth from the year-ago quarter's reported number. CCL delivered an earnings surprise of 19.2%, on average, in the trailing four quarters.
lululemon athletica inc. (LULU - Free Report) currently has an Earnings ESP of +0.53% and a Zacks Rank of 3. The company is expected to register top and bottom-line growth when it reports fourth-quarter fiscal 2023 numbers. The Zacks Consensus Estimate for LULU’s quarterly earnings has been unchanged in the last 30 days at $5.01 per share, suggesting growth of 13.9% from the year-ago quarter's reported number.
The Zacks Consensus Estimate for lululemon’s quarterly revenues is pegged at $3.2 billion, which suggests a growth of 15% from the figure reported in the year-ago quarter. LULU delivered an earnings surprise of 9.2%, on average, in the trailing four quarters.
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Here's How NIKE (NKE) is Placed Just Ahead of Q3 Earnings
NIKE Inc. (NKE - Free Report) is slated to release third-quarter fiscal 2024 results on Mar 21. The leading sports apparel retailer is likely to have witnessed year-over-year declines in the top and bottom in the fiscal third quarter.
The company has been gaining from its Consumer Direct Acceleration strategy, along with strong demand, compelling products and robust performance in its digital and DTC businesses. Supply-chain constraints, continued weakness in Greater China and higher costs have been weighing on its bottom-line performance.
The Zacks Consensus Estimate for fiscal third-quarter revenues is pegged at $12.3 billion, suggesting 0.8% decline from the year-ago quarter’s reported figure. The Zacks Consensus Estimate for the company’s fiscal third-quarter earnings is pegged at 70 cents per share, indicating a decline of 11.4% from the year-ago reported number. Earnings estimates for the fiscal third quarter have declined 2.8% in the last 30 days.
In the last reported quarter, the company delivered an earnings surprise of 22.6%. Its bottom line beat the consensus estimate by 25%, on average, over the trailing four quarters.
NIKE, Inc. Price and EPS Surprise
NIKE, Inc. price-eps-surprise | NIKE, Inc. Quote
Key Factors to Note
NIKE is expected to have witnessed continued gains from brand strength, robust consumer demand and an innovative product pipeline in the fiscal third quarter. Gains from its Consumer Direct Acceleration strategy, and robust digital and DTC performances are expected to have been other tailwinds.
Continued strength in retail traffic trends within NIKE Direct has been boosting conversion rates. The strong member buying trends are likely to have led to a record digital performance in the to-be-reported quarter. Strength in the North America, EMEA and APLA regions, fueled by increasing traffic, higher conversion and growth in average order value, is likely to have aided sales in the to-be-reported quarter.
The NIKE Direct business has been benefiting from robust growth across regions and an efficient digital ecosystem, which comprises its online site, and commercial and activity apps. Revenues at NIKE-owned stores are expected to have gained from improved traffic, higher conversion rates and growth in average order value. The NIKE Direct business is likely to have benefited from growth in North America, EMEA and APLA, offset by continued weakness in Greater China in the to-be-reported quarter.
We expect total NIKE Brand revenues to increase 1.5% year over year to $11,748.2 million in the fiscal third quarter, driven by a 0.8% rise in the Wholesale business.
On the last reported quarter’s earnings call, management stated that it expects strong gross margin execution and disciplined cost management to offset soft second-half revenues and drive earnings growth.
However, NKE has been witnessing a decline in the gross and operating margins due to rising costs, higher markdowns, increased freight and logistic costs, elevated input costs, and currency headwinds. Also, elevated SG&A expenses are concerning.
On the last reported quarter’s earnings call, the company predicted 160-180 bps improvement in the gross margin for the third quarter of fiscal 2024, driven by gains in strategic pricing, improved markdowns and lower ocean freight rates.
We expect gross profit to increase 3.2% year over year in third-quarter fiscal 2024, with a 160-bps expansion in the gross margin to 44.9%.
NIKE has been witnessing elevated SG&A expenses, driven by increased demand-creation expenses due to the normalization of sporting activities and overhead costs related to higher wages. Demand-creation expenses are likely to have increased in the fiscal third quarter, owing to elevated marketing and advertising investments. These investments are likely to have supported significant global sports moments and product launches, and investment in capabilities to transform NIKE's operating model for greater speed and effectiveness.
Operating overhead expenses are expected to have resulted from higher wage-related expenses and NIKE Direct costs, as well as increased technology investments to support digital transformation in the to-be-reported quarter.
We expect demand-creation expenses to increase 9.6% year over year and operating overheads to rise 2.1% year over year in the fiscal third quarter.
Driven by the gross margin growth offset by higher SG&A expenses, our model suggests a 20-bps expansion in the operating margin to 11.6% in the fiscal third quarter.
Zacks Model
Our proven model conclusively predicts 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
NIKE has an Earnings ESP of +5.21% and a Zacks Rank of 3.
Other Stocks Poised to Beat Earnings Estimates
Here are some other companies that you may want to consider, as our model shows that these also have the right combination of elements to post an earnings beat.
PVH Corp. (PVH - Free Report) currently has an Earnings ESP of +1.23% and a Zacks Rank of 2. The company is expected to register bottom-line growth when it reports fourth-quarter fiscal 2024 results. The Zacks Consensus Estimate for PVH’s quarterly revenues is pegged at $2.4 billion, which suggests a decline of 3.3% from the figure reported in the year-ago quarter. You can see the complete list of today's Zacks #1 Rank stocks here.
The consensus estimate for PVH’s bottom line has moved up 0.6% in the last 30 days to $3.49 per share, which suggests growth of 46.6% from the figure reported in the year-ago quarter. PVH has delivered an earnings surprise of 18.9%, on average, in the trailing four quarters.
Carnival Corp. (CCL - Free Report) currently has an Earnings ESP of +6.26% and a Zacks Rank of 2. The company is anticipated to register top and bottom-line growth in fourth-quarter fiscal 2023. The Zacks Consensus Estimate for CCL’s quarterly revenues is pegged at $5.4 billion, suggesting growth of 22% from the figure reported in the year-ago quarter.
The Zacks Consensus Estimate for Carnival's quarterly loss per share has narrowed by a penny in the last seven days to 17 cents per share. The consensus mark suggests 69.1% growth from the year-ago quarter's reported number. CCL delivered an earnings surprise of 19.2%, on average, in the trailing four quarters.
lululemon athletica inc. (LULU - Free Report) currently has an Earnings ESP of +0.53% and a Zacks Rank of 3. The company is expected to register top and bottom-line growth when it reports fourth-quarter fiscal 2023 numbers. The Zacks Consensus Estimate for LULU’s quarterly earnings has been unchanged in the last 30 days at $5.01 per share, suggesting growth of 13.9% from the year-ago quarter's reported number.
The Zacks Consensus Estimate for lululemon’s quarterly revenues is pegged at $3.2 billion, which suggests a growth of 15% from the figure reported in the year-ago quarter. LULU delivered an earnings surprise of 9.2%, on average, in the trailing four quarters.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.