Nike Inc (NYSE: NKE) will be reporting its fiscal fourth-quarter earnings on June 28, and investors are hoping Nike can finally get its margin growth and North American sales numbers on the right track. Analysts are predicting some big quarterly numbers from Nike, but fiscal 2019 guidance will likely steal the show.
Consensus analyst estimates for Nike’s quarter call for earnings per share of 64 cents. Analysts are also expecting revenue of $9.41 billion, up 8.4 percent from a year ago.
[See: Finish First With Athletic Apparel Stocks.]
Investors will be watching closely to see if Nike can finally grow its gross margins after eight consecutive quarterly declines. North American revenue will also be key after three straight quarters of negative growth.
Bank of America analyst Robert Ohmes is expecting Nike to report an EPS beat of 69 cents. Unfortunately, Ohmes says Nike will have a difficult time with its 2019 guidance. Ohmes says Nike’s previous long-term guidance of revenue growth in the mid-to-high single digits may have included beneficial foreign exchange assumptions that are no longer valid.
Ohmes says the North American market will continue to be difficult, and Nike could see more pressure in Europe and China than investors realize.
“NKE’s valuation appears stretched heading into 4Q, in our view, and expectations for a turnaround in North America appear fully priced in,” Ohmes says.
Foot Locker ( FL), Nike’s largest North American customer, reported a 2.8 percent decline in same-store sales in its fiscal first quarter. Dicks Sporting Goods ( DKS) and Hibbett Sports ( HIBB) also each reported same-store sales declines despite the launches of Nike products including Air Max 270 and Epic React.
Ohmes says an uptick in sales of Nike brand products is not offsetting declines in Jordan brand sales. Recent channel checks revealed that promotional pricing is still occurring in the North American market, including reports of price cuts to Air Max Plus and Shox Gravity. Ohmes says Nike can’t afford to be losing pricing power heading into the critical back-to-school shopping season.
[See: 8 Great Stocks for Millennials to Buy.]
For long-term investors, Ohmes says one good quarter is not enough of a reason to buy NKE stock.
“We see downside to NKE’s current P/E multiple given market share pressure in the U.S. and difficult international comparisons, which offset strong direct-to-consumer momentum and strength in China,” he says.
Bank of America has an “underperform” rating and $50 price target for NKE stock.
More from U.S. News
8 Ways to Get Kids Interested in Saving Money
7 Stocks That Could Save Your Portfolio
7 ETFs for a Summer Spending Boom
Nike Inc Earnings Preview: What To Expect From NKE Stock originally appeared on usnews.com
