The American sportswear consumer company Nike (NKE) is set to release fiscal first-quarter fiscal 2022 earnings on September 23.
Over the past year, shares of the company have gained around 38%, trading now at over $156.
Nike’s ability to stay contemporary has helped the company to become one of the most valuable brands in the world. Nike’s ongoing efforts, which include investments in numerous shopping apps and a focus on digital initiatives, are expected to boost sales in the upcoming quarter.
The COVID-19 pandemic, on the other hand, continues to disrupt supply chains, which might have harmed Nike’s top-line growth. As a result, I’m neutral on Nike stock.
Nevertheless, solid Q1 results might propel the stock price upward, so let’s take a closer look at what analysts on the Street are expecting. (See Nike Dividend Date and History on TipRanks)
Fiscal Q1 Expectations
For fiscal Q1, the Street expects Nike to report earnings of $1.12 per share and revenues of $12.46 billion.
Meanwhile, the Earnings Whisper number, or the Street’s unofficial view on earnings, stands at $1.21 per share.
Nike’s Prior Quarter Snapshot
Nike had a record-breaking fiscal fourth quarter, with revenues nearly doubling over the prior year quarter.
Revenues of $12.3 billion were higher than Wall Street’s expectations of $11.1 billion. That’s up nearly 96% from the year-ago quarter’s revenue, indicating a turnaround in the company’s operations.
Meanwhile, earnings came in at $0.93 per share, surpassing the $0.51 per share consensus expectation. Last quarter, the company posted a loss of $0.51 per share.
What to Watch for in Nike’s Earnings
Nike’s worldwide business strategy, brand strength, product innovations, and expanding digital capabilities all look to be robust.
In its last earnings call, Nike CEO John Donahoe said that “FY21 was a pivotal year for NIKE as we brought our Consumer Direct Acceleration strategy to life across the marketplace.”
This was because NIKE Direct, which concentrates on internet sales, is rapidly becoming an important part of Nike’s business strategy. In terms of figures, NIKE Direct’s fourth-quarter sales increased 73% year-over-year to $4.5 billion, which was very impressive.
As a result of COVID-19 forcing a move to e-commerce, NIKE Direct could again record strong sales in the upcoming quarter.
Furthermore, as direct sales have higher margins since there is no middleman involved, the firm should record strong margins in the following quarter.
On a less positive note, Nike is believed to have been affected by production interruptions in Vietnam as a result of another wave of COVID-19 outbreak in the region. As a result, product availability at retail outlets is likely to have been hampered, resulting in a reduction in Nike sales.
Analysts’ Recommendation
Ahead of the Q1 earnings release, Sam Poser of Williams Trading maintained a Buy rating on the stock and a price target of $196.00. This implies 25.3% upside potential to current levels.
Poser is confident in the company’s fundamentals, believing that it will “outperform its competitors in the short and long term.”
He further added that Nike’s strengthening “pricing power, supply chain flexibility, and its push towards digital sales” will help the company to offset the “impact of Covid-19 related supply chain congestion, temporary factory closures in southern Vietnam, port delays, and shortages of containers and trucks.”
In short, despite global supply chain challenges, Poser believes Nike is well-positioned to report strong numbers in the upcoming quarter.
Nike stock commands a Strong Buy consensus rating, based on 21 Buys, 3 Holds, and 1 Sell.
As for price targets, the average NKE price target of $187.26 implies 19.7% upside potential from the current levels.
Nike scores a 8 out of 10 from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
Disclosure: At the time of publication, Shalu Saraf did not have a position in any of the securities mentioned in this article.
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