Earnings Preview: Revisiting Nike ahead of Fiscal 2Q17 Results



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.

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About Nike

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.


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