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What Analysts Expect of Nike’s Q2 2019 EPS

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Dec. 12 2018, Published 3:20 p.m. ET

EPS projections

Nike (NKE) is scheduled to announce its fiscal 2019 second-quarter earnings results on December 20. Its adjusted EPS estimate for the quarter is $0.46, in line with the adjusted EPS it delivered in the same quarter of fiscal 2018. The company’s ongoing investments in digital expansion and its international operations could weigh on its bottom line.

In the first quarter of fiscal 2019, Nike’s adjusted EPS were $0.67, 6.3% better than analysts’ estimate and up 17.5% YoY (year-over-year). Nike’s management expects its SG&A (selling, general, and administrative) expenses to rise in the low teens owing to investments in digital capabilities and marketing investments. Its SG&A expenses for fiscal 2019 are expected to end up in the high single digits.

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Nike witnessed a 7% rise in selling and administrative expenses in the first quarter of fiscal 2019. As a percentage of its revenue, its selling and administrative expense rate leveraged 70 basis points to 30.8% due to higher revenue. The company’s demand creation expenses rose 13% to $964 million in the quarter.

In the first quarter, Nike’s gross margin expanded 50 basis points to 44.2% due to higher revenue. In the second quarter of fiscal 2019, Nike expects its gross margin expansion to be the same as it was in the second quarter of fiscal 2018. Nike Direct and product innovations could cushion its margins. In fiscal 2019, Nike’s gross margin is expected to expand ~50 basis points.

Peers’ recent quarterly numbers

In the third quarter of 2018, Under Armour (UAA) reported adjusted EPS of $0.25, beating analysts’ consensus estimate of $0.12. On a YoY basis, its EPS rose 13.6% owing to its top line growth.

In the third quarter, Skechers (SKX) reported adjusted EPS of $0.58, which beat the consensus estimate by 13.7%. However, on a YoY basis, it fell 1.7%. Increases in SG&A expenses and a higher tax rate dented the company’s bottom line.

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