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Why Nike’s Earnings per Share Jumped in Fiscal 2016

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Nov. 20 2020, Updated 2:53 p.m. ET

Recapping Nike’s performance in fiscal 2016

Nike (NKE) has posted three strong quarters of growth in fiscal 2016. Nike’s brand revenue has risen at a double-digit pace in all geographies in currency-neutral terms in the first nine months of the fiscal year.

However, revenue grew only about 6% in reported terms, coming in at $24.1 billion in 9M16.

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Nike’s earnings record

As a result of slower revenue growth, Nike has missed the consensus Wall Street analyst revenue forecast in two out of the three quarters of fiscal 2016, but it came out ahead on EPS (earnings per share) in all three quarters. Higher forex headwinds relative to peers operating mostly in the US have been featured prominently in Nike’s revenue performance. The weaker euro was a factor benefiting European rivals Adidas (ADDYY) and Puma (PMMAF) in 2015.

Nike and VF Corporation (VFC) have been affected more than most other US players in the athletic gear industry due to higher overseas exposure. VFC has missed on both revenue and EPS expectations in two of its last four quarters. Under Armour (UA), meanwhile, has provided both sales and EPS beats in its last four quarters.

EPS growth

However, Nike has managed to expand its profitability in 9M16, partly as a result of its above-average growth rates in the key North America and Greater China markets, higher DTC (direct-to-consumer) (XLY) (FXD) sales, and partly due to internal operational initiatives.

As a result, while the company’s adjusted EPS posted growth rates over 20% in all three quarters of the current fiscal year, revenue growth came in slower at a mid-single-digit pace. We’ll discuss Nike’s fourth quarter earnings and profitability expectations in more detail in Parts 5 and 6.

The next article will analyze the product sales trends seen by Nike and its peers in recent quarters.

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