Nike Inc (NYSE:NKE) continued its long earnings beat streak, but also managed to miss on revenues, sending NKE stock lower to cap an ugly Tuesday for the stock market.
For its fiscal third quarter, Nike earned $1.14 billion, or 68 cents per share. That was up 20% year-over-year, and far better than the average estimate of 53 cents.
NKE revenues, however, while up 5% to $8.43 billion, managed to fall about $40 million short of estimates.
Among some of the other important points of Nike’s Q3 earnings report:
- Gross margins contracted 140 basis points to 44.5% thanks to higher product costs, higher off-price sales and foreign exchange rates.
- Selling and administrative expenses were down 3%.
- Cash and short-term investments grew $1.1 billion over the past year to $6.2 billion.
- Futures orders — a metric that the company argues is an increasingly less important predictor of revenue — will be discussed during the earnings call. However, the company has ceased breaking this out in its release.
Of particular note are those gross margins, which Piper Jaffray analyst Errin Murphy brought up in a recent report:
“We see risk that Nike consensus sales & gross margin estimates are walked down over the NTM. While Nike typically meets/exceeds EPS on SGA control & often times tax rate, we believe futures have not yet inflected, see risk to Q4 gross margin & expect an initial FY18 guide that is below consensus.”
NKE stock was off about 2% in after-hours trading, which would put shares right against the short-term 20-day moving average, which has held as support once since shares bounced off the 50-day and back through the average after a short consolidation in February.
Still, the fundamental picture threatens to turn the bears against NKE, which had climbed 14% in 2017 after suffering through a horrid 2016 in which it lost roughly 20% to be one of the Dow Jones Industrial Average’s worst stocks.
As of this writing, Robert Martin did not hold a position in any of the aforementioned securities.
