Nike Q2 Earnings Preview: Improving Inventories, China Growth Could 'Slingshot' The Swoosh

Nike Inc NKE is set to report its fiscal second-quarter financial results after the market close on Tuesday. Here's a look at what to expect from the iconic athletic apparel brand.

What To Know: Nike is expected to report second-quarter earnings of 65 cents per share on quarterly revenue of $12.56 billion, according to average analyst estimates compiled by Benzinga Pro.

In Nike's most recent quarter, the Beaverton, Oregon-based company turned in better-than-expected results when it reported earnings of 93 cents per share on quarterly revenue of $12.7 billion. Analysts had been looking for earnings per share of 92 cents and revenue of $12.27 billion.

Despite the beat, the stock plunged on weaker margins driven by rising inventories. Even as Nike worked to liquidate excesses with discounts and direct sales, inventories still jumped more than 40% in the quarter. Investors will want to pay close attention to how Nike navigated these challenges in the second quarter.

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Although management noted at the time Nike was continuing to navigate volatility, the company also laid out expectations for continued growth throughout the year. 

"Our focus continues to be the consumer, as we take action to navigate near-term dynamics while expanding long-term structural benefits through our Consumer Direct Acceleration strategy," management said in September. 

On the company's conference call, management said it expected second-quarter revenue growth to be in the low double-digits. China revenues took the biggest hit last quarter so investors will want to watch for improving numbers out of China.

Credit Suisse analysts raised the price target on Nike shares ahead of the company's report, pointing to a significant recovery in China. 

The analyst firm called Nike a "must-own discretionary stock" that offers "high-quality exposure" to a reopening in China. If Nike is able to calm investor concerns about rising inventories, a reopening in China could "amplify a slingshot of revenue growth" for the company, Credit Suisse said.

Check This Out: Nike's Inventory In Focus & Slight Beat In Q2 Likely, Says Analyst

NKE Price Action: Nike has a 52-week high of $171.19 and a 52-week low of $82.22.

The stock closed Monday down 2.74% at $103.05, according to Benzinga Pro.

Photo: Rodger Shija from Pixabay.