Nike Early In ‘Turnaround Journey’: Q2 Earnings Preview - Nike (NYSE:NKE)

Nike Inc NKE will likely provide more color on what the future looks like under new CEO Elliot Hill when the apparel and footwear company reports second-quarter financial results after the market closes on Thursday.

Earnings Estimates: Analysts expect Nike to report second-quarter financial revenue of $12.13 billion. That’s down from $13.39 billion in last year's second quarter, according to data from Benzinga Pro.

The company has missed analyst revenue estimates in two straight quarters and four of the last five quarters. Over the last 10 quarters, Nike beat analyst revenue estimates six times.

Analysts expect the company to report second-quarter earnings per share of 64 cents. That’s down from $1.03 per share in last year's second quarter. The company has beaten analyst estimates for earnings per share in five straight quarters and nine of the last 10 quarters.

What Analysts Are Saying: Traffic and promotion trackers could signal a mixed second quarter from Nike, according to Goldman Sachs analyst Brooke Roach, who has a Buy rating and $97 price target.

Promotionality remains a key item to watch in the report, Roach said in a new investor note.

"On balance, our conversations with investors have been more muted on the stock in recent weeks, and our trackers largely demonstrate missed trends in F2Q," Roach said.

Commentary from retail partners suggests higher promotional activity during the holiday season and higher inventory levels, Roach said.

"We believe that recent data points suggest that it is still early in Nike's turnaround journey, and that we have yet to see signs of material brand heat improvement."

The focus in Wednesday's report will likely center on the future path to stronger innovation and top-line growth, Roach added.

Roach said they were looking forward to hearing from Hill in his fist official quarter. The 30-year Nike vet rejoined the company and became CEO on Oct. 14.

"We believe Mr. Hill will provide initial commentary around the forward strategy of the company including any material changes to his approach."

Telsey analyst Cristina Fernandez also shared a desire to hear about Nike's product innovation pipeline and new plans from Hill.

The analyst maintained an Outperform rating on Nike and lowered the price target from $96 to $93.

"Overall, Nike is in a period of transition and a return to growth could take a few quarters," Fernandez said in a recent investor note.

The analyst said the Nike turnaround could take around a year to show changes play out.

Here are other analyst ratings on Nike and their price targets:

Wells Fargo: Maintained Overweight rating, lowered price target from $95 to $92
Evercore ISI: Maintained Outperform rating, lowered price target from $105 to $97
Deutsche Bank: Maintained Buy rating, lowered price target from $92 to $82
Morgan Stanley: Maintained Equal-Weight rating, lowered price target from $82 to $80

Key Items to Watch: All eyes and ears will be on Hill when the company reports results Thursday.

One item to watch could be the company's focus on value or being a premium brand and product.

A recent YouGov 2024 value survey showed that Nike was the biggest gainer in the most improved score as a better deal in 2024 versus 2023 with an 8.5-point gain year-over-year. The survey suggests that consumers see Nike products as more affordable compared to what they were years ago or in comparison to peer brands.

Nike will likely not comment on President-elect Donald Trump‘s threat to impose tariffs on China. The company could be asked about this impact by analysts as many other companies have in recent weeks.

Investors might also focus on the geographical breakdown of revenues in the quarter. The last quarterly report showed overall revenue down 10% year-over-year with North America being one of the weakest regions at -11% year-over-year. China sales, by comparison, were down 4% year-over-year.

Price Action: Nike stock is up 0.4% to $78.33 on Wednesday versus a 52-week trading range of $70.75 to $123.39. Nike stock is down 26% year-to-date in 2024.

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