Earnings Preview: Nike Inc. - Analyst Blog

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Nike Inc. ( NKE ), a global leader in sports equipment and apparel is expected to report its financial results for the first quarter of fiscal 2013 after the market closes on Thursday, September 27, 2012. The Zacks Consensus Estimate for the quarter is $1.12 per share. This represents a year-over-year reduction of approximately 17.5%. For the quarter under review, revenue is expected to be $6,438 million, according to the Zacks Consensus Estimate.

With respect to earnings surprises, Nike has topped the estimate thrice over the trailing four quarters in the range of negative 14.6% to 12.4%. The average surprise over the last four quarters remained positive at 1.1%.

Fourth Quarter Fiscal 2012 - a synopsis

Nike posted earnings of $1.17 per share in the fourth quarter of fiscal 2012, dipping 6% year over year. Quarterly earnings also missed the Zacks Consensus Estimate of $1.37 per share by a huge margin. Diminished gross margin, higher SG&A expenses, increased tax rate and expenses associated with restructuring of NIKE Brand Western Europe's operations played spoilsports during the quarter.

In the fourth quarter, Nike's total revenue grew 12.2% to $6,470 million from $5,766 million in the prior-year quarter, primarily driven by growth in all key categories, products and geographies of NIKE Brand. Revenue for the quarter, however, lagged the Zacks Consensus Estimate of $6,488 million.

Zacks Consensus

The analysts following the stock expect Nike to post first-quarter fiscal 2013 earnings of $1.12 a share, lower than $1.36 delivered in the prior-year quarter. Currently, the Zacks Consensus Estimate ranges between $1.00 and $1.16 a share. We believe due to rising commodity costs estimates for the quarter has been expected below than the year-ago quarter.

Earnings Estimate Revisions

Agreement

We do not see any major estimate revisions at this point for the first quarter of fiscal 2013. Of the 14 estimates, only one revised downward, while none moved in the opposite direction in the last 30 days, for the first quarter. In the last 7 days, no movement in estimates noticed in either direction for the quarter.

Magnitude

The magnitude of estimate revisions for Nike depicts a pessimistic outlook for the upcoming quarter. Over the last 7 days, estimates for the upcoming quarter remained unchanged while it was lowered by a penny to $1.12 per share in the last 30 days.

Conclusion

In an attempt to expand its global reach and market share, Nike is aggressively expanding its operations in the emerging markets while focusing on direct-to-consumer business and other brands, which augur well for future operating performance. Moreover, the company's near-to-debt-free balance sheet offers financial flexibility.

However, sluggish discretionary spending and intense competition amid rapidly changing customer preferences will continue to weigh upon the company's future operating performance. Nike faces intense competition in both domestic and international markets from local as well as established players, such as Adidas AG (including Reebok), PVH Corporation ( PVH ) and Brown Shoe Company Inc. ( BWS ).

Currently, Nike maintains a Zacks #3 Rank, which translates into a short-term Buy rating.


 
BROWN SHOE CO (BWS): Free Stock Analysis Report
 
NIKE INC-B (NKE): Free Stock Analysis Report
 
PVH CORP (PVH): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: BWS , NKE , PVH

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