Nike Earnings: Expect Fireworks From NKE

by Dan Burrows | September 25, 2013 1:28 pm

If you’re looking for earnings fireworks, watch out for Nike (NKE[1]) after the bell Thursday. The Nike earnings report should come complete with robust profit and sales growth, with strong demand in North America more than offsetting sluggishness overseas.

The newly minted member[2] of the blue-chip Dow Jones Industrial Average is forecast to report a 7.6% improvement in Q1 revenues to $6.96 billion from $6.47 billion a year ago. Meanwhile, Nike earnings are expected to rise 20% to $705 million (78 cents a share) from $586 million (64 cents, adjusted for a stock split) in the year-ago quarter, according to data from Thomson Reuters.

But if history is any guide, Nike earnings will easily beat Wall Street’s forecast. The world’s largest athletic shoe and apparel company has topped analysts’ estimates for four consecutive quarters.

Top-line results, however, have been more hit-and-miss with regard to expectations. True, Nike eclipsed the Street’s revenue forecast last time around, but it has missed on the top line in two of the past four quarters.

If anything could cause Nike earnings to stumble in the most recent quarter, it’s that the company is coming up against some tough year-ago comparisons. Last year’s quarter included boosts from the London Olympics and the inking of a new deal with the NFL.

Of course, at the same time, the company has a huge catalyst on the horizon: The 2014 FIFA World Cup in Brazil.

One piece of data the Street always scrutinizes closely — and has a tendency to move the stock — is Nike’s worldwide futures orders scheduled for delivery. That’s the number that gives analysts and investors a pretty good idea of demand, so keep an eye on that.

Weaker consumer spending in Europe and Asia have put a damper on Nike’s international business for some time now. But with Europe emerging from recession and signs of a pick up in China, orders for future delivery could very well deliver a positive surprise.

Nike stock has gained 35% for the year-to-date. If the company serves another Street-beating quarter — especially when it comes to orders — you can expect more upside ahead.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.

Endnotes:
  1. NKE: http://studio-5.financialcontent.com/investplace/quote?Symbol=NKE
  2. newly minted member: http://investorplace.com/2013/09/dow-jones-industrial-average-nke-gs-v/

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