Can Nike Offer Repeat Earnings Performance Even With Dollar Drag?

Nike Inc. NKE outpaced Wall Street’s earnings expectations in recent quarters, sending its stock up some 35% so far in 2015. But can the global sports apparel-seller just do it again? It releases fiscal Q2 earnings results after today’s closing bell.

Nike’s story may be emblematic of other companies with a sizable global footprint. Company executives have noted the currency headwinds that eat into overseas profits; Nike has been no exception. They’ve mentioned high inventory issues, too. Those factors position select companies, including Nike, as potential broad-market barometers for a strong dollar’s sting on U.S. exporters and for overall discretionary spending health.

Still, for Nike specifically, analysts reporting to Thomson Reuters are looking for average earnings per share (EPS) of $0.86, up 13.1% over last year’s results, on topline sales growth of nearly 6% to $7.81 billion.

Option Signals?
Heading into that release, the options market reflects relative bullishness, at least short term. Implied volatility is “expensive” for NKE, running in the 90th percentile. Twice as many call buyers have emerged when compared to non-earnings trading periods, mostly in the monthly 130 and 135 call options. On the flipside, there are half as many put call buyers as usual. It’s a differential that could be reflecting some traders’ confidence that NKE will deliver with earnings once again. Guaranteed? No.

Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price and over a set period of time. Put options represent the right, but not the obligation, to sell the underlying security at a predetermined price over a set period of time.

Potential Trouble Spots
A string of sluggish U.S. retail sales figures since July, coupled with warmer weather trends, has spiked inventory levels at many retailers, according to industry data. Will inventory overhang impact Nike’s latest results?

The currency fluctuations impacting most multinationals could take a bite out of NKE’s earnings, say industry analysts, who note that international markets represent more than half of all Nike-branded sales. But expectations for strong receipts in Western Europe and solid performance in the U.S. could help, industry analysts add.

Quarterly results of course reflect the past and Wall Street will want to hear about the future, particularly how NKE has performed in the early stretches of the holiday-shopping season. In the last quarter, the company conference call included largely positive commentary on the rest of the year. But is this a stock that can play strong all four quarters?