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Is Digital Strength Likely to Aid NIKE's (NKE) Q1 Earnings?

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NIKE Inc. (NKE - Free Report) is slated to release first-quarter fiscal 2021 results on Sep 22. In the last reported quarter, the leading sports apparel retailer delivered a loss per share of 51 cents, whereas the Zacks Consensus Estimate was pegged at earnings of 2 cents. Moreover, its bottom line significantly lagged estimates, on average, over the trailing four quarters.

The Zacks Consensus Estimate for the company’s earnings for the fiscal first quarter is pegged at 42 cents, suggesting a decline of 51.2% from the year-ago reported figure. Notably, earnings estimates have moved north by a penny in the past seven days. The consensus estimate for first-quarter sales is pegged at $9.08 billion, indicating a 14.9% decline from the prior-year quarter’s reported number.

Key Factors to Note

NIKE has been benefiting from the shift to digital shopping by consumers due to the pandemic, thanks to its efficient digital ecosystem that comprises of its online site as well as commercial and activity apps. The company has been witnessing robust digital sales growth across all regions for the past few months, which has been compensating for the loss of in-store sales. The increasing popularity of digital shopping is likely to have contributed meaningfully to its sales in the first quarter of fiscal 2021.

NIKE, Inc. Price and EPS Surprise

 

NIKE, Inc. Price and EPS Surprise

NIKE, Inc. price-eps-surprise | NIKE, Inc. Quote

Even as stores reopen, the company has been witnessing strong digital trends, which demonstrates the strength of its brands and investments made over the past several years to improve digital consumer experiences.

Moreover, the reopened global store fleet is expected to have aided fiscal first-quarter sales. In the last reported quarter’s earnings call, management predicted sequential improvements from the reopening of retail stores and return of each market to normalized supply and demand in the fiscal first quarter. The company has been witnessing improved retail traffic at reopened stores on a week-over-week basis, with higher conversion rates than the prior year.

Moreover, lower SG&A expenses due to its cost-management initiatives like reducing marketing expenses due to the cancellation of most sporting events are likely to have aided the bottom line in the fiscal first quarter. Moreover, a decline in demand-creation expenses due to the shift in retail and brand marketing expenses as well as operating overhead expense leverage on lower total wages and travel and related expenses are expected to cushion the bottom line.

Zacks Model

Our proven model 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. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

NIKE has a Zacks Rank #3 and an Earnings ESP of +16.76%.

Other Stocks Poised to Beat Earnings Estimates

Here are some other companies that you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat:

Darden Restaurants, Inc. (DRI - Free Report) currently has an Earnings ESP of +108.96% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Costco Wholesale Corporation (COST - Free Report) presently has an Earnings ESP of +1.20% and a Zacks Rank #3.

CarMax, Inc. (KMX - Free Report) currently has an Earnings ESP of +31.93% and a Zacks Rank #3.

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