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Should You Tick Out Nike (NKE) Stock Ahead of Earnings?
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Sporting extravaganzas are lined up back to back, with the most prominent one being the Rio 2016 Summer Olympics in August. So, why is the leading sportswear retailer Nike Inc. (NKE - Free Report) feeling the heat before its fourth-quarter fiscal 2016 earnings release on Jun 28, 2016? The stock has lost nearly 12% in the last three months and about 13% year to date.
This trend of losing on stock price before an earnings release that precedes a key sporting event is not new to Nike as revealed by its price movement in the past 10 years. A layman may expect the stock price of a sporting goods giant like Nike to benefit from the limelight it gains ahead of any sporting extravaganza. But in reality, the huge spending on advertising before such events results in a slump.
These heavy investments in advertising weigh on the company’s earnings performance in quarters preceding major sporting events. Not only this, the company also takes a few quarters before stabilizing earnings following such heavy-advertising driven events.
Looking at the last quarter, Nike’s earnings beat expectations for the 15th straight quarter while its top line succumbed to a miss due to foreign currency headwinds. Though management retained its outlook for fiscal 2016, we feel that the internationally-exposed Nike will remain prone to currency fluctuations. This may keep the company’s top-line performance muted.
That said, we quickly jump on to the Zacks Rank and Earnings ESP to check what these parameters say of Nike’s fourth-quarter fiscal 2016 earnings.
Nike currently has a Zacks Rank #4 (Sell) and an Earnings ESP of -2.08%, which points to a miss in the to-be reported quarter. The Most Accurate estimate is pegged at 47 cents, below the Zacks Consensus Estimate of 48 cents. Notably, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to make us reasonably confident of an earnings beat.
Yet, given the fantastic stock that Nike is and the huge fan-following of the ‘Swoosh’, we would prefer to wait and see whether Nike’s fiscal fourth-quarter results catch up with the Rio Olympics fervor. Well, even if the spirit of Nike lovers die down going into the games, we should probably take the slide sportingly.
Stocks Looking Good Prior to Earnings Release
Rite Aid Corp. , scheduled to report first-quarter fiscal 2017 earnings on Jun 16, has an Earnings ESP of +20.00% and a Zacks Rank #3.
Constellation Brands Inc. (STZ - Free Report) , slated to report first-quarter fiscal 2017 earnings on Jun 30, has an Earnings ESP of +1.97% and a Zacks Rank #3.
Boyd Gaming Corporation (BYD - Free Report) , expected to report second-quarter 2016 earnings on Jul 28, has an Earnings ESP of +19.36% and a Zacks Rank #3.
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Should You Tick Out Nike (NKE) Stock Ahead of Earnings?
Sporting extravaganzas are lined up back to back, with the most prominent one being the Rio 2016 Summer Olympics in August. So, why is the leading sportswear retailer Nike Inc. (NKE - Free Report) feeling the heat before its fourth-quarter fiscal 2016 earnings release on Jun 28, 2016? The stock has lost nearly 12% in the last three months and about 13% year to date.
NIKE INC-B Price
NIKE INC-B Price | NIKE INC-B Quote
What’s Behind Nike’s Downslide?
This trend of losing on stock price before an earnings release that precedes a key sporting event is not new to Nike as revealed by its price movement in the past 10 years. A layman may expect the stock price of a sporting goods giant like Nike to benefit from the limelight it gains ahead of any sporting extravaganza. But in reality, the huge spending on advertising before such events results in a slump.
These heavy investments in advertising weigh on the company’s earnings performance in quarters preceding major sporting events. Not only this, the company also takes a few quarters before stabilizing earnings following such heavy-advertising driven events.
Looking at the last quarter, Nike’s earnings beat expectations for the 15th straight quarter while its top line succumbed to a miss due to foreign currency headwinds. Though management retained its outlook for fiscal 2016, we feel that the internationally-exposed Nike will remain prone to currency fluctuations. This may keep the company’s top-line performance muted.
NIKE INC-B Price and EPS Surprise
NIKE INC-B Price and EPS Surprise | NIKE INC-B Quote
That said, we quickly jump on to the Zacks Rank and Earnings ESP to check what these parameters say of Nike’s fourth-quarter fiscal 2016 earnings.
Nike currently has a Zacks Rank #4 (Sell) and an Earnings ESP of -2.08%, which points to a miss in the to-be reported quarter. The Most Accurate estimate is pegged at 47 cents, below the Zacks Consensus Estimate of 48 cents. Notably, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to make us reasonably confident of an earnings beat.
Yet, given the fantastic stock that Nike is and the huge fan-following of the ‘Swoosh’, we would prefer to wait and see whether Nike’s fiscal fourth-quarter results catch up with the Rio Olympics fervor. Well, even if the spirit of Nike lovers die down going into the games, we should probably take the slide sportingly.
Stocks Looking Good Prior to Earnings Release
Rite Aid Corp. , scheduled to report first-quarter fiscal 2017 earnings on Jun 16, has an Earnings ESP of +20.00% and a Zacks Rank #3.
Constellation Brands Inc. (STZ - Free Report) , slated to report first-quarter fiscal 2017 earnings on Jun 30, has an Earnings ESP of +1.97% and a Zacks Rank #3.
Boyd Gaming Corporation (BYD - Free Report) , expected to report second-quarter 2016 earnings on Jul 28, has an Earnings ESP of +19.36% and a Zacks Rank #3.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>