What Wedbush Is Watching Ahead of Nike Earnings

Companies and Brands

Published: June 14, 2018 11:41 am

Last Updated: January 11, 2020 10:21 pm

The fiscal fourth-quarter earnings for Nike, Inc. (NYSE: NKE) are scheduled to be reported in the next two weeks (June 28), and one analyst thinks this apparel giant could exceed expectations. Currently Nike is the third-best performing Dow Jones stock in 2018, and it is poised to continue winning as the broad markets seem be ramping up in the second half of the year.

Wedbush has an Outperform rating for Nike and raised its price target of $82 from $75, implying an upside of 10.6% from the most recent closing price of $74.11.

In terms of its Q4 estimates, Wedbush expects to see earnings per share of $0.68 and sales of $9.4 billion. Those are above the Thomson Reuters consensus estimates that are calling for $0.64 in EPS and $9.41 billion in revenue. The same period from last year had $0.60 in EPS and $8.68 billion in revenue.

According to the brokerage firm:

In North America, calendar 2018 began to see real progress on several fronts from inventory management, product and engagement that should translate into +L-MSD growth in FY19. Outside the US, while growth remains strong, Nike is likely taking share in Europe while sustaining +DD growth in China. Progress in NA around product and speed can also augment the sales opportunity in international markets as well. On the margin, NKE is poised to return to G/M expansion for the first time in eight consecutive quarters as FX pressure, DTC and ASP turn to a more meaningful tailwind. Finally, SG&A growth will likely be slightly above levels articulated during its analyst meeting (slight leverage), which is warranted given the inflection in NA and key global events (World Cup). In all, NKE’s multiple accelerates as sales momentum builds and G/M rates are expanding, which in our view are key factors in FY19. Our $82 price target implies 26.3x FY20E EPS, an 11% premium to its historical average.

Overall, Nike has outperformed the broad markets with the stock up 36.5% in the past 52 weeks. In just 2018 alone, the stock is up about 18.5%.

Shares of Nike were up 0.7% to $74.65 Thursday morning, with a consensus analyst price target of $71.60 and a 52-week range of $50.35 to $75.91.

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