D.A. Davidson Thinks The Street Is Overestimating Nike's Q1 Results

Citing lackluster retail traffic trends, D.A. Davidson said upside capacity for Nike Inc NKE is limited in terms of fiscal first quarter performance. The company is due to release its results on September 27 after the market close.

Estimates & Assumptions

Analyst Andrew Burns said he is modeling earnings per share of $0.52 and revenues of $8.836 billion, below the consensus estimates which call for earnings per share of $0.56 and revenues of $8.87 billion. Breaking down the sum of the parts, the analyst is estimating revenue growth of 5 percent, gross margin of 46.5 percent, down an estimated 98 basis point year-over-year, and a 17.4 percent increase in SG&A expense, reflecting Olympics and Euro Championships spend.

Asia & Emerging Market Boost for Future Orders

Burns expects futures orders, a key growth metric, to show a 9 percent increase, with China, the emerging markets and Japan powering performance. The analyst expects the firm to reiterate its 2017 guidance, as the company would strive to offset the revenue weakness by expense management.

Top Line Pressure

D.A. Davidson sees top line pressure stemming from a tough retail environment and higher brand competition. That said, the firm expects the company's market leadership position and earnings power to stay intact. The firm continues to recommend shares of the company, given its belief that its 2020 growth targets are achievable.