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We expect Nike Inc. (NKE - Analyst Report), a global leader in sports equipment and apparel, to beat expectations when it reports first-quarter fiscal 2014 results on Sep 26. In the past quarter, it posted a positive surprise of approximately 2.7% and we believe that the company will continue with its upbeat performance this quarter as well.

Why a Likely Positive Surprise?

Our proven model shows that Nike may beat earnings because it has the right combination of 2 key components.

Positive Zacks ESP: Nike currently has an Earnings ESP of +2.56%. This is because the Most Accurate Estimate stands at 80 cents per share, while the Zacks Consensus Estimate is pegged at 78 cents.

Zacks #3 Rank (Hold): Note that stocks with a Zacks Rank #1, 2 and 3 have higher chances of beating earnings. The Sell rated stocks (#4 and 5) should never be considered going into an earnings announcement.

The combination of Nike’s Zacks Rank #3 (Hold) and Earnings ESP of +2.56% makes us confident of a positive earnings beat on Sep 26.

What is Driving Better-than-Expected Earnings?

Nike’s strong portfolio of globally recognized brands – such as Nike, Converse, Chuck Taylor, Hurley, All Star, One Star, Star Chevron, and Jack Purcell – and its focus on innovation have helped in strengthening its position. Moreover, the company is seeking to expand its global footprint and increase market share by acquiring new brands, developing its direct-to-customer business and divesting underperforming brands.

We believe that the company’s prudent investment as well as strategic initiatives toward product innovation and brand building will increase its customer base and profitability. Going forward, we expect the company’s top-line growth to remain strong, given the rise in its future orders.

The company has surpassed the Zacks Consensus Estimate in the trailing 4 quarters with an average surprise of approximately 9.5%.

Other Stocks to Consider

Nike is not the only firm we are looking up to this earnings season. The following companies are also likely to beat earnings in the to-be-reported quarter:

Buckle Inc. (BKE - Snapshot Report) with an Earnings ESP of +1.10% and a Zacks Rank #3 (Hold).

Ralph Lauren Corp. (RL - Analyst Report) with Earnings ESP of +0.46% and a Zacks Rank #3 (Hold).

Dollar Tree Inc. (DLTR - Analyst Report) has an Earnings ESP of +1.70% and a Zacks Rank #3 (Hold).

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