Nike (NKE): Fitness Check Ahead of Earnings

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Nike Inc (NYSE:NKE) is revealing its third-quarter fiscal 2015 results after the close on Mar. 19.

nke stock nike stock nike earnings nke earnings nke stock today nke quoteNike earnings are expected to come in at 85 cents a share, down slightly from the 89 cents reported 90 days ago.

NKE, however, has a history of surprising on earnings, reporting EPS 5.6% higher than analyst estimates this time last year and having beaten estimates in each of the past 10 quarters.

But there are still some things for NKE investors to worry about.

NKE derives much of its revenue overseas, and Nike expects global market share to grow from 17% in 2011 to 27% in 2020.

In theory, a stronger dollar, while great news for consumers, could potentially derail NKE profits in the global market.

The increased strength of the U.S. dollar negatively affects global companies like Nike, causing U.S. goods to appear overpriced in foreign markets while imported goods are slapped with cheaper (and thus more attractive) price tags in the U.S.

NKE Stock Should Withstand Stronger Dollar

NKE has demonstrated, however, that it knows how to effectively operate with declining revenue, as Nike rose its operating profit in the U.K. despite a 13% dip in the top line.

Don’t discount the prestige value of NKE products, either. Consumers are still willing to pay high prices for the Nike brand.

During Nike’s fourth quarter report for fiscal 2014, NKE claimed worldwide futures orders were 11% higher year-over-year, with CEO Mark Parker remaining confident in the future:

“These results demonstrate the energy and excitement Nike brings to the market. Our ability to relentlessly innovate for consumers drove our growth in FY14, and will continue to fuel it for years to come. And as we grow, we remain focused on managing all areas of our business to drive sustainable, profitable growth for our shareholders.”

Nike continues to make moves ensuring global leadership, recently appointing Michael Spillane to Nike VP and GM of Global Footwear. Angela Dong will take over Spillane’s vacant position as VP and GM of Greater China.

Spillane is credited with strong growth in China, while Dong has a “proven track record and knowledge” of China when it comes to maximizing value for the Nike brand.

Nike Stock and Foot Locker (FL): Two Peas in a Pod

The performance of Foot Locker, Inc (NYSE:FL) correlates closely with Nike stock, making the two companies the dynamic duo of retailer and footwear brands. So, basically, what’s good for FL stock is usually good for Nike stock.

FL stock rose about 14% over the past month, helped mainly by its strong earnings report, showing FL comparable-store sales surged over 10% from last year from the opening of more than 80 new stores in its last fiscal year and a higher demand for basketball and running shoes.

It’s likely Nike stock will experience the same surge, as the high-demand for Foot Locker products likely translates into more revenue for NKE.

As Foot Locker rapidly drives growth in sales, gross margin and comparable store sales, look for NKE to reap major benefits.

Future Competition Heats Up

Looking at the evidence, I expect Nike stock to climb on positive earnings, but that doesn’t mean Nike stock is untouchable.

Over the last three months, NKE stock is up just 3% while Under Armour Inc (NYSE:UA) grew more than 15%, Lululemon Athletica inc (NASDAQ:LULU) Jumped 21%, and even Adidas (OTCMKTS:ADDYY) rose 11%. The latter company used its earlier-acquired Reebok brand to align with niche-fitness movements like CrossFit.

Moving forward, it’s critical to keep an eye on Nike competitors to glean just how bright the future is for Nike stock. As of this moment, though, it’s looking pretty good.

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

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Article printed from InvestorPlace Media, https://investorplace.com/2015/03/nke-nike-stock-nike-earnings/.

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