Nike Earnings Preview (NKE)

Nike NKE is scheduled to report its fiscal first-quarter results Thursday, September 26, at 4:15PM EDT. The conference call will begin at 5PM EDT and a live broadcast can be accessed here.

Profit is already expected to be down more than 30%, so some softness is likely already priced into the stock. China’s profit has been trending higher for all of 2013 and investors will want this to continue for Q1.

In addition, when Adidas cut profit guidance on September 20, Nike shares responded. If weakness in profit isn’t shown in Nike’s quarter tonight, it would be an especially good sign and would demonstrate that the company is handling costs well while their main competitor is not.

Expectations

Analysts estimate an EPS decrease of 35% YoY of $0.78 and a 4% YoY increase in sales of $6.96B. Gross margin is estimated at 43.8%, with 43.9% in Q4 2013, 43.5% in Q1 2013. Deutsche Bank analyst David Weiner said, “gross margin is key source of investor optimism."

North American future orders are expected to grow approximately 10%. “Flyknit,” basketball, running shoes, apparel key components to helping futures orders stay strong. North America made up 40% of sales, nearly 60% of company pretax profit last quarter (Q4). Chinese future orders expect growth just over flat (~0.5%). China made up 10% of sales, 20% of pretax profit last quarter.

Future orders are the key metric here, as analysts expect just under 8% growth in Q1. Analysts also look for reiterated guidance. Lowered guidance or indication of weakness could hurt stock. Market share growth is expected in North America where increased pricing could be partially offset by increased labor costs.

Performance

Nike has beat EPS figure in last four quarters. Sales were generally far less volatile than profit. Analysts expect a wider move on bottom line vs. top line. Over the last five quarters, sales grew or fell more than 1% in only one quarter.

The Company

Nike was originally founded as Blue Ribbon Sports in 1964 by Bill Bowerman and Phil Knight. Nike became the official name in 1978, to represent the Greek goddess of victory. It is a multinational company headquartered in Oregon and a supplier of footwear, equipment, apparel, accessories, and services. Nike is a valuable sports brand with trademarks of the Swoosh logo and ‘Just Do It.'