Earnings Preview: Nike & How To Trade It

Nike NKE is going to report fourth quarter earnings tonight after the bell, and Wall Street will be looking forward to seeing how rising commodity costs are affecting the world's largest athletic footwear maker. Nike is expected to report earnings of $1.16 per share on revenues of $5.54 billion. This is up from the same quarter last year, when Nike reported $1.06 per share in earnings on $5.1 billion in revenues. Last quarter, the company missed earnings, and shares plummeted, down more than 9% the next day. Nike is expected to come in with guidance for the next quarter of $1.27 per share on $5.67 billion in revenues. Nike is expected to have full year earnings of $4.32 per share on $20.63 billion in revenues. This would be 11% in earnings and nearly 9% in revenues from a year ago. Last quarter, Nike said that the earnings miss was due in large part to rising commodity costs, such as cotton, as well as shipping costs. If the Beaverton, Oregon-based Nike is able to report better than expected earnings and provide guidance better than what Wall Street is expecting, there is a potential trade off this earnings call besides going long Nike. Names like Foot Locker FL, Under Armour UA and to a lesser extent Lululemon LULU should all benefit from better-than-expected earnings. Nike is yielding 1.4%, and is trading at almost 17 times forward earnings, suggesting shares are not cheap at these levels. Technically speaking, the stock tends to see strong support around the $80 level, so if there is an earnings miss, traders can get out of a trade without too much of a loss.