Nike's Earnings: A Thing Of Beauty

Jun. 29, 2018 4:28 PM ETNIKE, Inc. (NKE)9 Comments


  • I turned out to be too cautious of a bull, as Nike delivered outstanding fiscal 4Q18 results and 2019 guidance.
  • The key factors that I believed would drive Nike's robust performance materialized, with the net earning impact surpassing my expectations.
  • NKE continues to look like a high-quality, GARP play at current levels.

Despite seeing several of my projections materialize, I turned out to be too cautious of a bull.

This Thursday, Nike (NYSE:NKE) delivered an impressive set of fiscal 4Q18 results. Revenues of $9.79 billion beat not only consensus by the widest margin of the past 18 quarters at least, it topped my more aggressive expectations as well. Net earnings of $0.69/share were higher than the Street's projection by a nickel, and seem to have come in ahead of management's own guidance.

Credit: UOL

In my recent earnings preview, I identified a few key factors that I believed would drive Nike's performance in the last quarter of fiscal 2018:

  1. Robust sales driven by Nike's international sector, boosted by World Cup-related revenues more evident in the apparel segment.
  2. Recovery in North America sales, more of a fiscal 2019 story, playing out modestly in the fourth quarter of this year.
  3. Gross margins flat to very slightly up, likely a result of strong pricing amid a strong global economic environment.
  4. Materially higher SG&A expenses as a result of seasonal brand marketing and digital channel investments.

On the first item above, the results certainly did not disappoint - far from it. Every geography outside North America saw revenues increase in the double digits, and each segment managed to boost sales at a more aggressive rate than in the first three quarters of the fiscal year. The World Cup effect that I have discussed was certainly a driving force, with "Global Football apparel approaching triple-digit growth in Q4 fueled by high-energy national team collections" in Europe.

On the second bullet, strength in both footwear and apparel helped Nike produce low single-digit growth that was noticeably better than early-year trends. Granted, comps were not too hard to beat this time, after the segment stalled in fiscal 2017. But I believe the recovery


NKE PE Ratio (Forward) data by YCharts

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This article was written by

DM Martins Research profile picture
Tracking Economic Inflection Points To Guide Your Asset Allocation Strategy

Daniel Martins is a Napa, California-based analyst and founder of independent research firm DM Martins Research. The firm's work is centered around building more efficient, easily replicable portfolios that are properly risk-balanced for growth with less downside risk.

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Daniel is the founder and portfolio manager at DM Martins Capital Management LLC. He is a former equity research professional at FBR Capital Markets and Telsey Advisory in New York City and finance analyst at macro hedge fund Bridgewater Associates, where he developed most of his investment management skills earlier in his career. Daniel is also an equity research instructor for Wall Street Prep.

He holds an MBA in Financial Instruments and Markets from New York University's Stern School of Business.

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On Seeking Alpha, DM Martins Research partners with EPB Macro Research, and has collaborated with Risk Research, Inc.

DM Martins Research also manages a small team of writers and editors who publish content on several channels, including Apple Maven ( and Wall Street Memes (

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I may own NKE through diversified ETFs.

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