Nike’s 2Q17 earnings preview
Nike (NKE), the world’s largest apparel company, is slated to release its results for 2Q17 after the market closes on December 20, 2016. Wall Street is expecting a 4.3% YoY (year-over-year) decline in Nike’s 2Q17 earnings to $0.43 per share on total sales of $8.1 billion.
The company started the year on firm footing and exceeded expectations on both revenues and earnings in the first quarter. Earnings per share (or EPS) rose 9% to $0.73, topping the Wall Street earnings estimates by $0.17. The first quarter marked the 17th consecutive earnings beat for Nike. Its top line improved 7.7% YoY to $9.1 billion, beating the consensus by $190 million.
Nike derives around 60% of its sales from footwear products. Its products are sold in over 190 countries. Nike is on Forbes’ list of most valuable brands with a brand value of $27.5 billion.
The company has a market capitalization of $86 billion as of December 15, 2016, and it forms part of the S&P 500 Index and the 30-stock Dow Jones Industrial Average Index. It constitutes 3.2% of the U.S. Consumer Goods ETF (IYK) and 2.9% of the SPDR Consumer Discretionary Select Sector ETF (XLY).
Valuations update and stock recommendation
Nike’s stock is currently trading at a one-year forward price-to-earnings ratio of 22x as compared to 49x for Under Armour (UAA), 29x for Lululemon Athletica (LULU), and 21.3x for Columbia Sportswear (COLM).
The average 12-month price target by 34 analysts covering Nike is $62.35, indicating an upside of ~20% over the next one year.
21 of the 33 analysts covering the stock have recommended a “buy” on the stock, 12 have recommended a “hold,” and one analyst has recommended a “sell” rating.
What’s in this series?
In this series, we’ll provide an update on Nike’s performance in 1Q17 along with a view of its expected performance in 2Q17. We’ll also briefly touch upon the company’s current valuation, its stock market performance, and Wall Street’s recommendations on the company.