Nike Inc. (NYSE:NKE) is set to report FQ3 2014 earnings after the market closes on Thursday, March 20th. Nike is one of the most iconic sports gear and athletic wear brands on the planet. This quarter, Wall Street is expecting Nike to expand its international presence and increase sales by 10% compared to FQ3 of last year. Despite the projected revenue growth, the Street is expecting Nike’s earnings to remain flat this quarter for the first time in over a year. Nike is facing increasing competition in its apparel business. Notably, the much smaller Under Armour (NYSE:UA) has been growing its yoy revenue by roughly 25% per quarter and is beginning to challenge Nike in the high end sportswear market within the United States. While Under Armour may be on the rise, Nike has a much stronger international presence and touts quarterly revenue roughly 10x higher than its smaller competitor. Here’s what investors are expecting from Nike Thursday afternoon.
The information below is derived from data submitted to the Estimize.com platform by a set of Buy Side and Independent analyst contributors.
The current Wall Street consensus expectation is for Nike to report 73c EPS and $6.818B revenue, while the current Estimize.com consensus from 45 Buy Side and Independent contributing analysts is 76c EPS and $6.842B in revenue. This quarter, the buy-side as represented by the Estimize.com community is expecting Nike to beat the Wall Street consensus on both EPS and revenue.
Over the past 6 quarters, the consensus from Estimize.com has been more accurate than Wall Street in forecasting Nike’s EPS and revenue 5 times and once, respectively. By tapping into a wider range of contributors including hedge-fund analysts, asset managers, independent research shops, students, and non professional investors, Estimize has created a data set that is more accurate than Wall Street up to 69.5% of the time, but more importantly, it does a better job of representing the market’s actual expectations. It has been confirmed by an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.
The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case, we are seeing an average difference between the 2 groups’ expectations.
The distribution of estimates published by analysts on the Estimize.com platform range from 70c to 86c EPS and from $6.704B to $6.947B in revenues. This quarter, we’re seeing a larger distribution of estimates on Nike.
The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A wider distribution of estimates signaling less agreement in the market, which could mean greater volatility post earnings.
Over the past 4 months, the Wall Street EPS consensus fell from 79c to 73c, while the Estimize consensus decreased from 83c to 76c. Meanwhile, the Wall Street revenue forecast increased from $6.744B to $6.818B, while the Estimize forecast dropped initially before increasing at the end of the quarter from a low of $6.832B to $6.842B. Timeliness is correlated with accuracy and at the end of the quarter, we saw divergent revenue expectations between Wall Street and the Estimize community.
The analyst with the highest estimate confidence rating this quarter is WallStreetBean, who projects 76c EPS and $6.810B in revenue. In the Winter 2014 season, WallStreetBean is rated as the 21st best analyst and is ranked 10th overall among over 4,000 contributing analysts. This season, WallStreetBean has been more accurate than Wall Street in forecasting EPS and revenue 59% and 50% of the time, respectively, over 110 estimates. Estimate confidence ratings are calculated through algorithms developed by deep quantitative research, which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case, WallStreetBean is expecting Nike to report in-line with the Estimize community consensus on EPS but come up short on revenue.
This quarter, contributing analysts on the Estimize.com platform are taking an optimistic view on Nike and have set their expectations above Wall Street’s. Although Wall Street is expecting Nike to report flat earnings compared to FQ3 last year, the community is looking for Nike to grow EPS by 4%.