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Nike (NKE) Stock Sinks 1.5% Ahead of Q1 Earnings: What to Watch

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Shares of Nike NKE slipped 1.5% during regular trading hours Monday just one day before the company is scheduled to release its fiscal Q1 financial results. The decline goes against Nike’s impressive 2018 run, so let’s see what to expect from Nike after the closing bell Tuesday.

Nike has been one of the Dow’s top performers this year, with its roughly 35% surge outpacing Apple AAPL and Microsoft MSFT. Much of the recent momentum stems from the sportswear giant’s strong fourth quarter performance that saw it return to growth in North America and expand it Greater Chine. Nike, like other retailers, has made a significant direct-to-consumer push through its own apps, along with partnerships with Amazon AMZN, Chinese e-commerce power JD.Com JD, and even Facebook FB.

Nike’s growth in Europe and China outpaced rival Adidas’ ADDYY expansion in those two vital markets last quarter. The company is still the largest sportswear company in the U.S. and will continue to sponsor both the NFL and the NBA. The Oregon-based firm’s growth in athleisure has also helped it compete against Lululemon LULU and Gap GPS.

 

Outlook

Moving on, our current Zacks Consensus Estimate is calling for Nike’s Q1 revenues to jump by 8.9% to hit $9.88 billion. The sportswear powerhouse is also expected to see its North American revenues pop by roughly 3% hit $4.047 billion, based on our current NFM estimates.

Meanwhile, Nike’s adjusted quarterly earnings are expected to jump by 8.8% to $0.62 per share. But, we still need to know how likely it is that Nike tops our quarterly earnings estimate.

Luckily, we can turn to our exclusive Earnings ESP figure to help us find out. Zacks Earnings ESP (Expected Surprise Prediction) compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter. The Most Accurate Estimate is a version of the Zacks Consensus whose definition is related to change.

This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.

A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.

Nike currently sports an earnings ESP of -0.22% and a Zacks Rank #3 (Hold). Therefore, our model is inconclusive. However, Nike has topped our quarterly earnings estimates for almost five straight years. Investors should note that NKE stock will likely trade based on its e-commerce and North American performance in the short-term.

Nike is scheduled to report its quarterly financial results after the close of regular trading on Tuesday, September 25.

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