Nike Earnings Preview: Lower EPS, Higher Sales Expected

Nike

, which recently announced an additional $8 billion in share buybacks, is scheduled to report its first-quarter fiscal 2013 results Thursday, September 27, after the markets close. Investors will be looking to see the impact on revenues due to the economic slowdown in China and Europe, as well as from rising costs of packaging, fuel and raw materials.

Analysts on average predict that Nike will report per-share earnings of $1.12 for the quarter, as well as about $6.41 billion in revenue. But that compares to the same period of last year, when the company reported a profit of $1.36 per share and $6.08 billion in revenue. The consensus earnings per share (EPS) estimate is the same as it was 60 days ago. Nike fell short of EPS expectations in the fourth quarter, ending a four-quarter streak of upside surprises. The earnings slump in the fourth quarter was attributed to higher SG&A expenses, an increased tax rate and expenses associated with restructuring of Nike's Western European operations. The company also said it had purchased approximately $4.1 billion of its shares as part of its $5 billion share buyback program. Nike's share price dropped about nine percent following the report. Looking ahead to the current quarter, the consensus forecast calls for year-over-year growth of both EPS and revenue. And so far, analysts expect full-year per-share earnings to be about eight percent higher, as well as for revenue to rise almost five percent from the previous year.

Beaverton, Oregon-based Nike is the world's leading supplier of athletic shoes and apparel. It also sells sports accessories and performance equipment, and it operates retail stores under the Niketown name. It is an S&P 500 component with a market capitalization of more than $43 billion. It was founded in 1964, and Mark Parker has been the chief executive since 2006. Competitors include Addias and Under Armour

. The full-year forecast for the former calls for per-share earnings about 12 percent higher and revenue to rise about five percent from the previous year. Analysts expect the latter to post EPS that are up more than 15 percent and sales that are more than 23 percent higher for the current quarter. During the three months that ended in August, Nike began to sell off its Umbro and Cole Haan units, named a new president of its Jordan brand, signed Anthony Davis to a sponsorship deal, had a presence at the London Olympics despite not being a sponsor and stood by embattled Lance Armstrong.

Nike's long-term EPS growth forecast is more than 10 percent. The price-to-earnings (P/E) ratio is higher than the industry average, but so is its operating margin. It has a return on equity of about 22 percent and a dividend yield near 1.5 percent. Short interest is less than two percent of the float. But of 20 analysts surveyed by Thomson/First Call who follow the stock, only seven rate the shares at Buy or Strong Buy. The mean price target, a sign of where analysts expect the share price to go, is more than nine percent higher than the current share price. The stock has pulled back about four percent in the past week and is trading in the same neck of the woods as it was at the beginning of the year. The share price is well below the 200-day moving average. Over the past six months, the stock has underperformed Addidas and Under Armour, as well as the broader markets.