Nike set to report earnings as Wall Street looks for details on product innovation

By Stock News On Jun 26, 2024 14 0

Nike (NKE) is expected to report fiscal fourth quarter results after the bell on Thursday.

Investors are focused on how consumers are holding up amid fears of a spending slowdown. In other words: Is there room for Nike to reignite sales growth?

Wall Street and its fans are also closely monitoring product innovation as the Oregon giant works to fend off competition in its core athletic footwear market — from rivals like Adidas (ADDYY) and relative upstarts like On (ONON) and Deckers’ (DECK) Hoka brand.

With the stock down more than 15% over the last year, a far cry from the S&P 500’s (^GSPC) 26% gain, some analysts are questioning whether the latest earnings report can spark a fresh round of positives about the stock.

To be sure, Wall Street has largely been pleased with Nike’s cost management, which is expected to be on display with increasing margins and earnings per share during the fourth quarter. But analysts are closely watching for information on new products, and other potential drivers of future sales growth.

For instance: In one skeptical note previewing the fourth quarter earnings release, UBS analyst Jay Sole wrote simply that the event is “not looking like a big catalyst.” Sole added that after several quarters of slowing sales growth, the looming question is whether Nike’s falling growth rate has “bottomed and is about to inflect [higher].”

Here’s what Wall Street expects, according to Bloomberg consensus estimates:

Revenue: $12.86 billion vs. $12.82 billion (same period year prior)
Adjusted earnings per share (EPS): $0.85 vs. $0.66 (same period year prior)
Gross margin estimate: 45.3% vs. 43.6% (same period year prior)

Several Wall Street analysts noted that a key part of Nike’s earnings release will be the company’s 2025 guidance, which is when many investors anticipate a turnaround could take place.

Bank of America’s Lorraine Hutchinson noted that there are positives in Nike’s increasing margins — and the eventual launch of a new product pipeline. But she doesn’t expect those potential benefits to impact metrics in the first half of Nike’s fiscal year 2025 (which already began on June 1).

“Building evidence of Nike’s innovation pipeline would bolster confidence in a [second half of 2025] turnaround,” Hutchinson wrote.

Wall Street expects Nike to generate earnings per share of $3.90 on revenue of $52.21 billion in 2025, per Bloomberg consensus data.

Nike reports results later than most of its wholesale partners, like Foot Locker (FL), Dick’s Sporting Goods (DKS), and JD Sports (JD.L). Wedbush analyst Tom Nikic believes that positive commentary from those companies over the past few months could point to a promising new product line from Nike.

Those companies, essentially Nike’s three most important partners, all spoke glowingly about new products that were shown at recent visits to Nike’s headquarters and at an “Innovation Summit” in Paris in April, Nikic wrote in a research note. “If the retailers’ comments prove to be prescient, then NKE could be in for much stronger fundamental performance in CY25 and beyond.”