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Factors Likely to Support NIKE's (NKE) Beat in Q3 Earnings
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NIKE Inc. (NKE - Free Report) is slated to release third-quarter fiscal 2023 results on Mar 21. The leading sports apparel retailer is likely to have witnessed top-line growth in the fiscal third 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 third-quarter revenues is pegged at $11.4 billion, suggesting 4.6% growth from the prior-year quarter’s reported figure. The Zacks Consensus Estimate for the company’s fiscal third-quarter earnings is pegged at 51 cents per share, suggesting a decline of 41.4% from the year-ago reported number. Earnings estimates for the fiscal third quarter have moved up by a penny in the past seven days.
We expect the company’s fiscal third-quarter total revenues to increase 1.1% year over year to $10,989.8 million and the bottom line to decline 51.1% to 43 cents per share.
In the last reported quarter, the company delivered an earnings surprise of 30.8%. Its bottom line beat the consensus estimate by 15.8%, on average, over the trailing four quarters.
NIKE is expected to have witnessed continued strong demand for its products, robust performances in its digital and DTC businesses, and its product innovation pipeline in third-quarter fiscal 2023. Gains from its Consumer Direct Acceleration strategy are expected to have been other tailwinds. Continued strength in retail traffic trends within NIKE Direct has been boosting conversion rates. The strong member buying trends are likely to have resulted in record digital results in the to-be-reported quarter.
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 1.1% year over year to $10,440.9 million in the fiscal third quarter, suggesting a 2.8% decline in Direct-to-Consumer and a 4.7% rise in the Wholesale business.
On the last reported quarter’s earnings call, management predicted third-quarter fiscal 2023 revenue growth to be higher than the fourth quarter due to the timing of wholesale shipments.
However, 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’s earnings call, management provided a bleak view for third-quarter fiscal 2023, driven by expectations of higher markdowns, a higher off-price mix to liquidate elevated inventory, headwinds related to elevated freight and logistic costs, and unfavorable currency impacts. For third-quarter fiscal 2023, we expect the gross margin to decline 300 bps year over year to 43.6%. Management predicted the third-quarter fiscal 2023 gross margin to decline at a similar rate to the second quarter of fiscal 2023.
NIKE has been reporting elevated SG&A expenses, driven by increased demand creation expenses due to the normalization of sporting activities and overhead costs related to higher wages. Demand-creation expenses are likely to have increased in the fiscal third quarter, owing to elevated marketing and advertising investments. Operating overhead expenses are expected to have resulted from higher wage-related expenses and NIKE Direct costs, as well as increased technology investments to support digital transformation in the to-be-reported quarter.
On the last reported quarter’s earnings call, management expected fiscal third-quarter SG&A expenses to be in line with the fiscal second quarter. Our model estimates SG&A expenses of $4,126.3 million, indicating a 20% year-over-year increase.
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 +11.11% and a Zacks Rank #2.
Other Stocks Poised to Beat Earnings Estimates
Here are some other companies that you may want to consider, as our model shows that these also have the right combination of elements to post an earnings beat:
lululemon athletica (LULU - Free Report) currently has an Earnings ESP of +1.29% and a Zacks Rank #3. LULU is likely to register top and bottom-line growth when it reports fourth-quarter fiscal 2022 numbers. The Zacks Consensus Estimate for its quarterly revenues is pegged at $2.69 billion, suggesting 26.4% growth from the figure reported in the prior-year quarter.
The Zacks Consensus Estimate for earnings for lululemon’s fiscal fourth quarter is pegged at $4.25, suggesting an improvement of 26.1% from the year-ago quarter’s reported number. However, the consensus mark for the fiscal fourth quarter has increased by a penny in the past 30 days. LULU has delivered a bottom-line beat of 6.7%, on average, in the trailing four quarters.
Whirlpool (WHR - Free Report) currently has an Earnings ESP of +24.62% and a Zacks Rank of 3. The company is expected to register top and bottom-line declines when it reports first-quarter 2023 numbers. The Zacks Consensus Estimate for WHR’s quarterly revenues is pegged at $4.5 billion, which suggests a decline of 8.6% from the prior-year quarter’s reported figure.
The Zacks Consensus Estimate for Whirlpool’s quarterly earnings has declined 15% in the past 30 days to $1.99 per share. However, the consensus loss estimate suggests a decline of 62.5% from the year-ago quarter’s figure. WHR has delivered an earnings surprise of 4.1%, on average, in the trailing four quarters.
Mattel (MAT - Free Report) currently has an Earnings ESP of +20.46% and a Zacks Rank #3. MAT is anticipated to register top and bottom-line declines when it reports first-quarter 2023 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $772.8 million, indicating a decline of 25.8% from the figure reported in the prior-year quarter.
The Zacks Consensus Estimate for Mattel’s loss of 9 cents per share has widened by 2 cents in the past 30 days. The consensus loss estimate suggests a significant decline from earnings of 8 cents reported in the prior-year quarter. MAT has delivered an earnings beat of 124.8%, on average, in the trailing four quarters.
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Factors Likely to Support NIKE's (NKE) Beat in Q3 Earnings
NIKE Inc. (NKE - Free Report) is slated to release third-quarter fiscal 2023 results on Mar 21. The leading sports apparel retailer is likely to have witnessed top-line growth in the fiscal third 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 third-quarter revenues is pegged at $11.4 billion, suggesting 4.6% growth from the prior-year quarter’s reported figure. The Zacks Consensus Estimate for the company’s fiscal third-quarter earnings is pegged at 51 cents per share, suggesting a decline of 41.4% from the year-ago reported number. Earnings estimates for the fiscal third quarter have moved up by a penny in the past seven days.
We expect the company’s fiscal third-quarter total revenues to increase 1.1% year over year to $10,989.8 million and the bottom line to decline 51.1% to 43 cents per share.
In the last reported quarter, the company delivered an earnings surprise of 30.8%. Its bottom line beat the consensus estimate by 15.8%, 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 performances in its digital and DTC businesses, and its product innovation pipeline in third-quarter fiscal 2023. Gains from its Consumer Direct Acceleration strategy are expected to have been other tailwinds. Continued strength in retail traffic trends within NIKE Direct has been boosting conversion rates. The strong member buying trends are likely to have resulted in record digital results in the to-be-reported quarter.
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 1.1% year over year to $10,440.9 million in the fiscal third quarter, suggesting a 2.8% decline in Direct-to-Consumer and a 4.7% rise in the Wholesale business.
On the last reported quarter’s earnings call, management predicted third-quarter fiscal 2023 revenue growth to be higher than the fourth quarter due to the timing of wholesale shipments.
However, 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’s earnings call, management provided a bleak view for third-quarter fiscal 2023, driven by expectations of higher markdowns, a higher off-price mix to liquidate elevated inventory, headwinds related to elevated freight and logistic costs, and unfavorable currency impacts. For third-quarter fiscal 2023, we expect the gross margin to decline 300 bps year over year to 43.6%. Management predicted the third-quarter fiscal 2023 gross margin to decline at a similar rate to the second quarter of fiscal 2023.
NIKE has been reporting elevated SG&A expenses, driven by increased demand creation expenses due to the normalization of sporting activities and overhead costs related to higher wages. Demand-creation expenses are likely to have increased in the fiscal third quarter, owing to elevated marketing and advertising investments. Operating overhead expenses are expected to have resulted from higher wage-related expenses and NIKE Direct costs, as well as increased technology investments to support digital transformation in the to-be-reported quarter.
On the last reported quarter’s earnings call, management expected fiscal third-quarter SG&A expenses to be in line with the fiscal second quarter. Our model estimates SG&A expenses of $4,126.3 million, indicating a 20% year-over-year increase.
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 +11.11% and a Zacks Rank #2.
Other Stocks Poised to Beat Earnings Estimates
Here are some other companies that you may want to consider, as our model shows that these also have the right combination of elements to post an earnings beat:
lululemon athletica (LULU - Free Report) currently has an Earnings ESP of +1.29% and a Zacks Rank #3. LULU is likely to register top and bottom-line growth when it reports fourth-quarter fiscal 2022 numbers. The Zacks Consensus Estimate for its quarterly revenues is pegged at $2.69 billion, suggesting 26.4% growth 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 earnings for lululemon’s fiscal fourth quarter is pegged at $4.25, suggesting an improvement of 26.1% from the year-ago quarter’s reported number. However, the consensus mark for the fiscal fourth quarter has increased by a penny in the past 30 days. LULU has delivered a bottom-line beat of 6.7%, on average, in the trailing four quarters.
Whirlpool (WHR - Free Report) currently has an Earnings ESP of +24.62% and a Zacks Rank of 3. The company is expected to register top and bottom-line declines when it reports first-quarter 2023 numbers. The Zacks Consensus Estimate for WHR’s quarterly revenues is pegged at $4.5 billion, which suggests a decline of 8.6% from the prior-year quarter’s reported figure.
The Zacks Consensus Estimate for Whirlpool’s quarterly earnings has declined 15% in the past 30 days to $1.99 per share. However, the consensus loss estimate suggests a decline of 62.5% from the year-ago quarter’s figure. WHR has delivered an earnings surprise of 4.1%, on average, in the trailing four quarters.
Mattel (MAT - Free Report) currently has an Earnings ESP of +20.46% and a Zacks Rank #3. MAT is anticipated to register top and bottom-line declines when it reports first-quarter 2023 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $772.8 million, indicating a decline of 25.8% from the figure reported in the prior-year quarter.
The Zacks Consensus Estimate for Mattel’s loss of 9 cents per share has widened by 2 cents in the past 30 days. The consensus loss estimate suggests a significant decline from earnings of 8 cents reported in the prior-year quarter. MAT has delivered an earnings beat of 124.8%, on average, in the trailing four quarters.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.