Earnings Preview: Nike Q4 2014

| About: Nike Inc. (NKE)

Summary

Nike Corporation is slated to report 4Q 2014 earnings after the close on Thursday, June 26th.

Earnings Per Share: The Street estimate is $0.75 (range $0.70 to $0.80).

Revenues: Expectations are to increase 9.7% y/y to $7.34 bln (range $7.25 bln to $7.43 bln).

By: Craig Bowles

Overview

Nike Corporation (NYSE:NKE) is slated to report 4Q 2014 earnings after the close on Thursday, June 26th. The earnings release is expected at approximately 4:15 p.m. EST with a 5:00 p.m. conference call webcast available at Nike Investor Relations. The athletic footwear and apparel maker's brand alone is valued at $10.7 billion, making it the most valuable brand among sports businesses. Nike is an S&P 500 component and was added to the Dow Industrial Average late last year, so results have an increased market moving impact.

Outliers & Strategy

Key measures:

  • Earnings Per Share: The Street estimate is $0.75 (range $0.70 to $0.80) (Yahoo! Finance). Consensus has been reduced from $0.82 three months ago.
  • Revenues: Expectations are to increase 9.7% y/y to $7.34 bln (range $7.25 bln to $7.43 bln).
  • Price/Earnings of 24.8 compares to a 5-year average of 22.4 and industry average of 21.9; Price/Book of 5.8 compares to a 5-year average of 4.3 and industry average of 4.4; Price/Sales of 2.5 compares to a 5-year average of 2.1 and industry average of 1.8. So, the stock is on the high side of valuations.
  • Nike insiders sold 702,794 shares over the last twelve months. The company has done $1.7 billion in year-to-date buybacks.
  • Nike is expected to get a boost from the World Cup, especially if Brazil does well with Nike having invested in their 22-year old star Neymar.
  • Nike results could have an impact other athletic footwear companies, such as Finish Line (NASDAQ:FINL), Shoe Carnival (NASDAQ:SCVL), Steven Madden (NASDAQ:SHOO), Foot Locker (NYSE:FL) and DICK'S Sporting Goods (NYSE:DKS). Performance apparel makers Under Armour (NYSE:UA) and lululemon athletica (NASDAQ:LULU) could be impacted, as well.
  • Nike shares have a 1-day average price change on earnings of 4.59%. Options are pricing in an implied move of 3.27% off earnings.

Recent News

  • 06/20 Nike appointed Reenie Benziger as VP of its global apparel business, responsible for the creation and production of the company's products around the world.
  • 06/12 Citi reiterated a Buy rating after recent meetings with management indicated continued focus on Europe and China should deliver better turnover and lower inventory risk, according to Benzinga.com.
  • 05/21 Analysts remain bullish with 20 Buy ratings, 5 holds, and 0 sells, according to Analystratings.net.
  • 05/15 Nike and Adidas comprise 70% of the market for soccer gear, according to a post by BusinessWeek.
  • 05/10 Nike is moving their focus away from wearable technology and shifting to software, according to a story on MotleyFool.com.
  • 04/30 Nike appears to be rebounding in China after three consecutive quarterly declines, according to a story on MotleyFool.com.

Technical Review

After a 60% rise in 2013, Nike entered a $71 to $80 trading range but is clinging close to the 200-day moving average going into the earnings release. Recent consolidation in the $74 to $77 suggests the potential for a healthy move off earnings. If the $71 area of support fails, $62.50 is the next balance area. Above $77 would point to a third test on the $79 area in an attempt on making more all-time highs. (Chart courtesy of StockCharts.com)

Summary

Nike has beaten estimates each of the last four quarters and traders expect the same this quarter. The company probably needs to report close to the high side of the range of analyst estimates for earnings and revenue with future orders above 9% for a favorable market response. Hopefully, the company will report above $0.78 on revenue above $7.40 bln and traders can embrace the positive World Cup sentiment.

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