NIKE Inc. NKE is slated to release second-quarter fiscal 2023 results on Dec 20. The leading sports apparel retailer is likely to have witnessed top-line growth in the fiscal second quarter, while its earnings per share are expected to have declined year over year.
The company has been gaining from its Consumer Direct Acceleration strategy, along with strong demand, compelling products, and robust performance in its digital and DTC businesses. Supply-chain constraints, continued weakness in Greater China and higher costs have been weighing on its performance.
The Zacks Consensus Estimate for fiscal second-quarter revenues is pegged at $12.6 billion, suggesting 11% growth from the prior-year quarter’s reported figure. The Zacks Consensus Estimate for the company’s fiscal second-quarter earnings is pegged at 65 cents per share, suggesting a decline of 21.7% from the year-ago reported number. Earnings estimates for the fiscal second quarter have moved down by a penny in the past seven days.
We expect the company’s fiscal second-quarter total revenues to increase 10.5% year over year to $12,547 million and the bottom line to decline 18.6% to 68 cents per share.
In the last reported quarter, the company delivered an earnings surprise of 2.2%. Its bottom line beat the consensus estimate by 16.1%, on average, over the trailing four quarters.
NIKE, Inc. Price and EPS Surprise
NIKE, Inc. price-eps-surprise | NIKE, Inc. Quote
Key Factors to Note
NIKE is expected to have witnessed continued strong demand for its products, robust performance in its digital and DTC businesses, and product innovation pipeline in second-quarter fiscal 2023. Gains from its Consumer Direct Acceleration strategy are expected to have been other tailwinds.
On the last reported quarter’searnings call the company predicted real dollar revenue growth in the low-double digits.
The NIKE Direct business has been benefiting from robust growth across regions and an efficient digital ecosystem, which comprises its online site, as well as commercial and activity apps. Revenues at NIKE-owned stores are expected to have gained from improved traffic, higher conversion rates and growth in average order value. The NIKE Direct business is likely to have benefited from growth in North America, EMEA and APLA, offset by continued weakness in Greater China in the to-be-reported quarter.
We expect total NIKE Brand revenues to increase 10.8% year over year to $11,987.9 million in the fiscal second quarter, suggesting 11.2% growth in Direct-to-Consumer and a 10.6% rise in the Wholesale business.
However, NIKE’s second-quarter fiscal 2023 revenues are likely to have been impacted by weakness in Greater China due to the adverse impacts of COVID-19 disruption, leading to muted store operations and retail traffic.
NKE has been witnessing a decline in the gross and operating margins due to rising costs, higher markdowns and adverse currency effects.
On the last reported quarter’searnings call management provided a bleak view for second-quarter fiscal 2023, driven by expectations of higher markdowns during the holiday season and slowed demand for NIKE's brands, including Jordan and Converse, stemming from reduced discretionary spending.
For second-quarter fiscal 2023, we expect the gross margin to decline 370 bps year over year to 42.2%, in sync with the company’s expectation of a 350-400-bps contraction.
The return of sports activities and events has been leading to elevated selling and administrative (SG&A) expenses for NKE, driven by an increase in operating overhead and demand-creating expenses. Increased sports marketing expenses and sustained investments in digital marketing to support elevated digital demand have been resulting in higher demand-creating expenses.
Further, higher wage-related expenses and NIKE Direct variable costs, as well as increased technology investments to support digital transformation, have been causing increased operating overhead costs.
Our estimate indicates a 6.5% year-over-year increase in SG&A expenses for the fiscal second quarter. Operating overhead and demand-creating expenses are expected to increase 1.5% and 8.4% year over year, respectively, in the fiscal second quarter.
Zacks Model
Our proven model conclusively predicts an earnings beat for NIKE this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
NIKE has an Earnings ESP of +1.09% and a Zacks Rank #3.
Other Stocks Poised to Beat Earnings Estimates
Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:
Limoneira Co. LMNR has an Earnings ESP of +25.00% and currently sports a Zacks Rank #1. LMNR is likely to register bottom-line growth when it reports fourth-quarter fiscal 2022 numbers. The Zacks Consensus Estimate for its quarterly revenues is pegged at $32.96 billion, suggesting a 1.6% decline from the figure reported in the prior-year quarter.
You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Limoneira’s fiscal fourth-quarter loss is pegged at 11 cents, suggesting an improvement from a loss of 28 cents reported in the year-ago quarter. However, the consensus loss estimate has widened by 2 cents in the past 30 days. LMNR has delivered a bottom-line beat of 13.3%, on average, in the trailing four quarters.
Carnival Corp. CCL currently has an Earnings ESP of +3.40% and a Zacks Rank of 3. The company is expected to register top and bottom-line growth when it reports fourth-quarter fiscal 2022 numbers. The Zacks Consensus Estimate for CCL’s quarterly revenues is pegged at $3.98 billion, which suggests growth of 209.1% from the prior-year quarter’s reported figure.
The Zacks Consensus Estimate for Carnival’s quarterly loss has widened by 2 cents in the past seven days to 89 cents per share. However, the consensus loss estimate suggests an improvement from the year-ago quarter’s loss of $1.72 per share. CCL has delivered a bottom-line miss of 120%, on average, in the trailing four quarters.
General Mills GIS currently has an Earnings ESP of +0.11% and a Zacks Rank #3. GIS is anticipated to register top and bottom-line growth when it reports second-quarter fiscal 2023 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $5.2 billion, indicating an improvement of 2.5% from the figure reported in the prior-year quarter.
The Zacks Consensus Estimate for General Mills’ earnings of $1.06 per share has moved up by a penny in the past seven days. The consensus estimate suggests growth of 7.1% from 99 cents reported in the year-ago quarter. GIS has delivered an earnings beat of 6.1%, on average, in the trailing four quarters.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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