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Will Coronavirus Outbreak Weigh on NIKE's (NKE) Q3 Earnings?

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NIKE Inc. (NKE - Free Report) is slated to release third-quarter fiscal 2020 results on Mar 24. In the last reported quarter, the leading sports apparel retailer delivered a positive earnings surprise of 20.7%. Moreover, its bottom line beat estimates by 10.9%, on average, over the trailing four quarters.

The Zacks Consensus Estimate for the company’s earnings for the fiscal third quarter is pegged at 58 cents, suggesting a decline of 14.7% from the year-ago reported figure. Notably, earnings estimates have declined by 1 cent in the past seven days. The consensus estimate for the fiscal third-quarter sales is pegged at $9,871 million, indicating 2.7% growth from the prior-year quarter’s reported number.

NIKE, Inc. Price and EPS Surprise

 

NIKE, Inc. Price and EPS Surprise

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

Key Factors to Note

The novel coronavirus outbreak has led to a lockdown in many countries. In response, NIKE earlier closed its stores in China, one of its key markets, to help contain the spread. Further, the company is likely to have faced supply-chain disruptions as the majority of shoes sold in the United States are manufactured in China. We expect its third-quarter fiscal 2020 performance to have been impacted by the aforementioned closure of stores and factories across China.

Further, concerns related to higher operating costs, tariffs and foreign currency might have hurt performance in the fiscal third quarter.

However, NIKE has been witnessing robust top and bottom-line performances for the past several quarters on gains from its Consumer Direct Offense strategy, which focuses on product innovation and strengthening of the digital platform. Despite the store closures, the company’s online shopping site — nike.com — and the Nike app have been operational even at the time of the virus outbreak. This should have supported its digital sales and partly cushioned the anticipated decline in overall brick-and-mortar sales.

Zacks Model

Our proven model does not predict 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 #4 and an Earnings ESP of -10.23%.

Stocks Poised to Beat Earnings Estimates

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

lululemon athletica inc. (LULU - Free Report) currently has an Earnings ESP of +0.42% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

CarMax, Inc. (KMX - Free Report) presently has an Earnings ESP of +0.13% and a Zacks Rank #3.

Fastenal Company (FAST - Free Report) currently has an Earnings ESP of +0.36% and a Zacks Rank #3.

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