Nike Reporting Q3 Today – Will It Beat Earnings a 10th Time?
Stock Analysis & Ideas

Nike Reporting Q3 Today – Will It Beat Earnings a 10th Time?

Story Highlights

Nike is scheduled to report its Q3FY23 results on March 21. A confluence of factors, including inventory management, the reopening of China, logistics, and foreign exchange headwinds, may have impacted its results.

Athletic footwear and apparel company Nike (NYSE:NKE) is set to report its third quarter Fiscal 2023 results on March 21, after the market closes. The Street expects Nike to post diluted earnings of $0.56 per share on revenues of $11.48 billion. Meanwhile, in Q3FY22, Nike reported diluted earnings of $0.87 per share on revenues of $10.87 billion. Nike beat earnings in the past nine quarters, and it remains to be seen if NKE can produce a tenth consecutive earnings beat.

Factors Impacting Nike’s Q3 Results

One of the most important factors determining Nike’s performance in Q3 will be its excess inventory management. Nike witnessed bloated inventory levels through the holiday season and up until the last quarter. It remains to be seen how Nike’s promotional efforts to clear the shelves have affected its margins.

Secondly, the reopening of the Chinese economy might have positively impacted Nike’s revenues. China remains one of the major markets for Nike, and the retailer’s past success has been hampered by the country’s strict COVID-19 policy. Now, as China eases controls, Nike’s sales may have received a boost in the third quarter.

And lastly, competition from other major brands continues to be a challenge for Nike. Having said that, other athletic wear manufacturers are facing the same problems as Nike and are expected to improve performance in the coming months as shipping, logistics, and foreign exchange rates turn favorable.

Is Nike a Buy, Sell, or Hold?

With 12 Buys and two Hold ratings, Nike commands a Strong Buy consensus rating on TipRanks. Also, the average Nike stock prediction of $135 implies 12.1% upside potential from current levels. Meanwhile, NKE stock has gained 1.7% so far this year.

Remarkably, Jefferies analyst Randal Konik believes that Nike may report Q3 outperformance based on the company’s digital footprint of sneakers. Konik also believes that weak performance from rival Adidas (GB:0OLD) (ADDY) may have led to Nike’s gain. Konik has a Buy rating on NKE with a price target of $140, implying 16.3% upside potential.

Ending Thoughts

Nike is poised for solid Q3 results based on a combination of the above factors. Further, Nike currently trades at a price/earnings per share (P/E) multiple of 34x, much higher than the sector average of 14.83x but lower compared to its own five-year average of 47.72x, showing a strong possibility of future stock price appreciation. What’s more, Nike pays a regular quarterly common dividend of $0.34 per share, reflecting a current yield of 1.07%.



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