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Can Continued Segmental Growth Aid NIKE (NKE) in Q2 Earnings?
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NIKE Inc. (NKE - Free Report) is slated to report top and bottom-line numbers for second-quarter fiscal 2020 on Dec 19. Investors continue to be optimistic about the contributions from North America and China regions to the company’s results. Improvements in these segments along with synergies from the Consumer Direct Offense and gains in international and digital businesses are likely to drive the top line in second-quarter fiscal 2020.
The NIKE stock has been displaying a strong momentum with shares gaining 5% in the past month compared with the industry’s 3.1% growth. Additionally, the stock has surged 33.2% year to date, keeping investors’ optimism alive.
However, management had earlier warned of softness in its earnings outcome due to adverse impacts of currency rates and higher SG&A expenses. Furthermore, it expects the gross margin for the fiscal second quarter to reflect pronounced impacts of increased tariffs.
With that said, let’s discuss the company’s key segmental prospects and the likely contributions to earnings this time around.
North America Poised for Sustained Growth
NIKE’s North America business revived growth at the end of fiscal 2018 after suffering a major downturn. Consistent growth in NIKE digital and a strength in the sportswear category, led by the Jordan brand, have been aiding the segment’s performance.
The company is likely to have gained from efforts to re-establish its position in the North America market with robust growth in NIKE digital and across key differentiated partners like Foot Locker (FL - Free Report) , Nordstrom (JWN - Free Report) and DICK’S Sporting Goods (DKS - Free Report) . The company’s investments in delivering differentiated partner experiences are driven by attempts like testing new services and leveraging the NIKE app in partner stores. Further, innovation in footwear and strong demand in apparel are other growth drivers.
China Business Looks Alluring
Despite tariff-related concerns, NIKE continues to deliver solid results in Greater China, one of its key markets, with constant progress in the digital business. Revenue growth in the region is bolstered by strength in almost all key categories, led by sportswear and Jordan. Additionally, the company’s digital business in the region is witnessing robust uptick, partly attributable to partnerships with Tmall and WeChat. The company’s China business is expected to have gained traction from the launch of the NIKE app in Greater China during late second-quarter fiscal 2020.
Overall Business Trends
NIKE’s advancement in the Consumer Direct Offense as well as growth in international and NIKE Direct businesses has been driving its performance. Consequently, the company has delivered strong top and bottom-line performances in the past few years.
NIKE continues to seek opportunities for fortifying its global footprint, popularity and market share. Apart from the aforementioned regions, the NIKE brand is becoming a consumer favorite in all key cities across EMEA, which have been fueling growth in the region. Notably, EMEA includes five of NIKE’s 12 major cities.
As part of digital growth, NIKE continues to leverage its mobile apps including the NIKE and sneakers apps, which are now live in more than 20 countries. The company expects to launch these apps in several countries through the balance of fiscal 2020. After the NIKE app’s unveiling in China, the launch of the sneakers app is likely to mirror significant gains for the EMEA and APLA segments.
Moreover, the company is investing in leveraging its retail stores with the NIKE app. The ‘NIKE app at Retail’ has an ability to scale up business with wholesale partners. As a result, the company activated the features of the ‘NIKE app at Retail’ and NIKE membership program with a wholesaler through a pilot program at Foot Locker’s Washington Heights store in first-quarter fiscal 2020. Going forward, this Zacks Rank #3 (Hold) company expects to integrate ‘NIKE app at Retail’ in more number of Foot Locker stores across North America along with bringing new experiences to Zolando in Europe and top sports stores in China throughout fiscal 2020.
Despite the volatile macroeconomic and geopolitical environment, NIKE expects investments in key capabilities to aid digital transformation and deliver robust growth throughout fiscal 2020. It expects results for the upcoming quarters to be driven by brand recognition, robust innovation pipeline and positive response from Nike Direct and wholesale partners.
For second-quarter fiscal 2020, the company predicts revenue growth in line with the first-quarter fiscal 2020 level. On a currency-neutral basis, it expects strong revenues despite a negative impact of nearly 3 points from foreign currency translations.
Gross margin for the fiscal second quarter is estimated to expand 25 bps, reflecting slightly higher growth than expected for the second half of fiscal 2020. However, the company expects pronounced impacts of the recently enacted tariffs on the gross margin for the fiscal second quarter.
It also expects a high-single digit rise in SG&A expenses. It anticipates an increase of $10-$30 million in other expenses, net of interest expenses. Effective tax rate is expected in the mid-teens range.
The Zacks Consensus Estimate for the company’s earnings in the fiscal second quarter is pegged at 57 cents, indicating growth of 9.6% from the prior-year reported figure.
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This pioneering tech ticker had soared to all-time highs and then subsided to a price that is irresistible. Now a pending acquisition could super-charge the company’s drive past competitors in the development of true Artificial Intelligence. The earlier you get in to this stock, the greater your potential gain.
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Can Continued Segmental Growth Aid NIKE (NKE) in Q2 Earnings?
NIKE Inc. (NKE - Free Report) is slated to report top and bottom-line numbers for second-quarter fiscal 2020 on Dec 19. Investors continue to be optimistic about the contributions from North America and China regions to the company’s results. Improvements in these segments along with synergies from the Consumer Direct Offense and gains in international and digital businesses are likely to drive the top line in second-quarter fiscal 2020.
The NIKE stock has been displaying a strong momentum with shares gaining 5% in the past month compared with the industry’s 3.1% growth. Additionally, the stock has surged 33.2% year to date, keeping investors’ optimism alive.
However, management had earlier warned of softness in its earnings outcome due to adverse impacts of currency rates and higher SG&A expenses. Furthermore, it expects the gross margin for the fiscal second quarter to reflect pronounced impacts of increased tariffs.
With that said, let’s discuss the company’s key segmental prospects and the likely contributions to earnings this time around.
North America Poised for Sustained Growth
NIKE’s North America business revived growth at the end of fiscal 2018 after suffering a major downturn. Consistent growth in NIKE digital and a strength in the sportswear category, led by the Jordan brand, have been aiding the segment’s performance.
The company is likely to have gained from efforts to re-establish its position in the North America market with robust growth in NIKE digital and across key differentiated partners like Foot Locker (FL - Free Report) , Nordstrom (JWN - Free Report) and DICK’S Sporting Goods (DKS - Free Report) . The company’s investments in delivering differentiated partner experiences are driven by attempts like testing new services and leveraging the NIKE app in partner stores. Further, innovation in footwear and strong demand in apparel are other growth drivers.
China Business Looks Alluring
Despite tariff-related concerns, NIKE continues to deliver solid results in Greater China, one of its key markets, with constant progress in the digital business. Revenue growth in the region is bolstered by strength in almost all key categories, led by sportswear and Jordan. Additionally, the company’s digital business in the region is witnessing robust uptick, partly attributable to partnerships with Tmall and WeChat. The company’s China business is expected to have gained traction from the launch of the NIKE app in Greater China during late second-quarter fiscal 2020.
Overall Business Trends
NIKE’s advancement in the Consumer Direct Offense as well as growth in international and NIKE Direct businesses has been driving its performance. Consequently, the company has delivered strong top and bottom-line performances in the past few years.
NIKE continues to seek opportunities for fortifying its global footprint, popularity and market share. Apart from the aforementioned regions, the NIKE brand is becoming a consumer favorite in all key cities across EMEA, which have been fueling growth in the region. Notably, EMEA includes five of NIKE’s 12 major cities.
As part of digital growth, NIKE continues to leverage its mobile apps including the NIKE and sneakers apps, which are now live in more than 20 countries. The company expects to launch these apps in several countries through the balance of fiscal 2020. After the NIKE app’s unveiling in China, the launch of the sneakers app is likely to mirror significant gains for the EMEA and APLA segments.
Moreover, the company is investing in leveraging its retail stores with the NIKE app. The ‘NIKE app at Retail’ has an ability to scale up business with wholesale partners. As a result, the company activated the features of the ‘NIKE app at Retail’ and NIKE membership program with a wholesaler through a pilot program at Foot Locker’s Washington Heights store in first-quarter fiscal 2020. Going forward, this Zacks Rank #3 (Hold) company expects to integrate ‘NIKE app at Retail’ in more number of Foot Locker stores across North America along with bringing new experiences to Zolando in Europe and top sports stores in China throughout fiscal 2020.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for revenues of $10,082 million suggests an increase of 7.6% from the year-ago reported figure. (Read More: NIKE to Report Q2 Earnings: What's in the Offing?)
NIKE, Inc. Price and EPS Surprise
NIKE, Inc. price-eps-surprise | NIKE, Inc. Quote
Overall Earnings & Revenue Expectations
Despite the volatile macroeconomic and geopolitical environment, NIKE expects investments in key capabilities to aid digital transformation and deliver robust growth throughout fiscal 2020. It expects results for the upcoming quarters to be driven by brand recognition, robust innovation pipeline and positive response from Nike Direct and wholesale partners.
For second-quarter fiscal 2020, the company predicts revenue growth in line with the first-quarter fiscal 2020 level. On a currency-neutral basis, it expects strong revenues despite a negative impact of nearly 3 points from foreign currency translations.
Gross margin for the fiscal second quarter is estimated to expand 25 bps, reflecting slightly higher growth than expected for the second half of fiscal 2020. However, the company expects pronounced impacts of the recently enacted tariffs on the gross margin for the fiscal second quarter.
It also expects a high-single digit rise in SG&A expenses. It anticipates an increase of $10-$30 million in other expenses, net of interest expenses. Effective tax rate is expected in the mid-teens range.
The Zacks Consensus Estimate for the company’s earnings in the fiscal second quarter is pegged at 57 cents, indicating growth of 9.6% from the prior-year reported figure.
Free: Zacks’ Single Best Stock Set to Double
Today you are invited to download our latest Special Report that reveals 5 stocks with the most potential to gain +100% or more in 2020. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.
This pioneering tech ticker had soared to all-time highs and then subsided to a price that is irresistible. Now a pending acquisition could super-charge the company’s drive past competitors in the development of true Artificial Intelligence. The earlier you get in to this stock, the greater your potential gain.
See 5 Stocks Set to Double>>