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Nike, the athletic footwear and apparel giant, reports fiscal Q1 2013 financial results after the bell on Thursday, Sept 27th, 2012, with analyst consensus expecting $1.12 in earnings per share on $6.4 billion in revenue, for expected year-over-year growth of 3% and 5% respectively.

With the Olympics over, China slowing and crude oil back up near $100, Nike is facing the same headwinds we wrote about last June.

In the fiscal 4th quarter ended May '12, Nike missed pretty badly on the EPS estimate, and futures orders came in slightly below where analysts had pegged growth at 12% constant currency growth. Also, last quarter, China futures fell to just +2%, which was a geography that had been growing at a 25% - 35% rate, until China engineered its own slowdown.

Gross margin continues to be an issue, as NKE's gross margin continues to compress, declining for 5 straight quarters. Inventory growth has exceeded revenue growth at Nike for 6 straight quarters, possibly due to the Olympics, and possibly due to China's slowdown.

That being said, some of the positives last quarter continue to be North America futures growth and the US footwear business, as the US remains a very strong cog in the international machine.

My personal issue with the stock today is simply valuation: at $97 per share, Nike is trading at 24(x) cash-flow with a 3% cash-flow yield (defined as 4-quarter trailing cash-flow divided by market cap) and an 18(x) p.e on the fiscal 2013 estimate of $5.16.

There has been downward pressure on earnings estimates for the past year, probably due to China, and margin pressures, with lesser pressure on revenue estimates, but still a lower drift.

The fact is a world-class brand like Nike, rarely - if ever - gets to be a screaming buy on valuation. When you look across the globe at world-class consumer brands, Nike is always one of the first to come to mind, maybe even better than Apple today, given that the Nike brand has survived numerous scares with key brands and key names like Tiger and Lance and such. You have to admire Mr Knight's loyalty sticking by athletes in tough times, very much unlike the corporate world today.

Last June, when Nike reported the stock fell to the mid $80s after-hours prior to rebounding. The technicals still look shaky, and with pressure on revenue and earnings estimates and the very pricey valuation, we are going to continue to give the stock time to come in, preferably to the low $80s, which it might never see.

We remain long a position in Nike from May, 2004 at a cost of $34 per share, in a long-term tax-averse account. We would back up the proverbial truck in the low $80s, and even more so under $80, but world-class brands such as Nike often don't trade that cheap for very long.

Source: Nike Earnings Preview: Still Love The Brand, But Still Wary Of The Valuation