Company / Analytics

Analytics, 18 March 2021

Nike’s Q3 earnings likely to beat estimates

Sportswear manufacturer Nike will report Q3 fiscal earnings report after market close on Thursday. Forecasts are high that the brand is poised for another strong quarter, beating revenue and earnings expectations, driven by a boost in digital revenues. Analysts polled by Bloomberg predict Nike will report adjusted earnings per share of 75 cents on revenue of $11.008 billion.

Preview of Nike earnings

Nike will report third-quarter financial report that is likely to beat analyst estimates after the bell on Thursday. Nike was a major winner in 2020, and several analysts have expressed optimism about the results amid that momentum. Yet their confidence comes at a time when the shares’ climb has slowed, rising just 1.4% since January, after a 115% run in the past 12 months.

Investors are likely interested in hearing out about: what is coming up next for the company, how big was their business, what’s going on in China, and how they are continuing to build the strength of the Nike and the Jordan brands. Analysts believe Nike is likely to talk about how the business has continued to bounce back from the pandemic. Growth is likely to have increased in greater China, in addition to a rebound in the US and Europe.

The company is expected to deliver solid growth, even from Europe where stores have shut down because of government-mandated restrictions for the last three months.

What will the earnings be like?

Analysts polled by Bloomberg predict Nike will report adjusted earnings per share of 75 cents on revenue of $11.008 billion.

Nike is doing exceptionally well thanks to its loyal customer base, unique product portfolio, digital infrastructure, and impressive gains in China. In fiscal Q2 (ended Nov 30), the company’s revenue increased 9% y-o-y and diluted earnings per share grew 11% y-o-y. The retailer found a dramatic shift in revenue generation from stores to e-commerce, as its direct-to-consumer segment increased by 84% y-o-y to account for more than 30% of total sales. In addition, the Greater China segment recorded 24% revenue growth and now represents 21% of Nike Brand revenue.

The driver behind the expected growth is likely to be Nike’s digital platform. The Nike brand still resonates well with the Gen Z/millennial consumer on both performance and lifestyle basis. The company has added more than 70 million new members worldwide to its loyalty program since the start of the coronavirus pandemic.

The COVID-19 pandemic has likely pushed Nike’s plans forward by years; by shifting the way people shop to more digital, a trend which is here to stay. Nikes digital platform has expanded tremendously. E-commerce revenue will likely have expanded by up to 50% again, year-over-year globally, and the financial model is poised for inflection on a margin basis into the coming years.

How does the future look for Nike?

Nike is specialized in designing, developing, and marketing footwear, apparel, equipment, and accessory products. It is easy to believe that the easing of pandemic restrictions will result in a surge due to pent-up demand. In addition, the forthcoming Summer Olympics will also likely contribute to spending more on athletic wear.

Nike is committed to opening more stores to accelerate growth and provide a more digitally connected experience for customers. It announced plans to open 30 stores in the second half of fiscal 2021. The company’s management has also announced a 12% increase in its annual dividend to $1.10 per share, in line with its track record of raising dividends for 19 consecutive years.

Should you buy Nike stock?

The 32 analysts tracking Nike stock maintain a buy rating on the stock, a rating which has held steady since February.

The 30 analysts offering 12-month price forecasts for Nike Inc have a median target of 166.50, with a high estimate of 185.00 and a low estimate of 140.00. The median estimate represents a +14.83% increase from the last price of 145.00, according to CNN Business.

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