NKE: Should You Buy Nike Stock Before it Reports Earnings This Week?

Nike, Inc. (NKE), a sports footwear and apparel giant, has managed to retain the top spot within its industry for many years. The company’s online business has been booming during the pandemic as consumers are turning to its website and app to shop for sneakers and workout apparel.

Despite a global economic recession and major supply chain disruptions for much of this year, NKE witnessed impressive earnings and sales growth. The company might even deliver better numbers in its upcoming earnings report as its digital sales continued to soar last quarter, with a rising number of coronavirus cases with each passing day. NKE is scheduled to release its second quarter fiscal 2021 results this Friday, December 18^th. The consensus EPS estimate of $2.88 for the current year indicates an 80% improvement year-over-year. The consensus revenue estimate of $41.99 billion for the current year indicates a 12.3% increase from the same period last year.

NKE’s accelerating brand momentum and its focus on normalizing marketplace supply and demand have allowed it to gain 42.6% over the past year. This impressive performance combined with several other factors has helped NKE earn a “Strong Buy” rating in our proprietary ratings system.

Here’s how our proprietary POWR Ratings system evaluates NKE:

Trade Grade: A

NKE is currently trading above its 50-day and 200-day moving averages of $130.68 and $105.67, respectively, indicating that the stock is in an uptrend. Also, the stock gained 16.9%, over the past three months, reflecting solid short-term bullishness.

Nike has stepped up its direct-to-consumer online strategy amid the pandemic, developing its workout app to drive digital sales. The company’s direct sales increased 13% year-over-year (on a currency-neutral basis) to $3.70 billion in the fiscal first quarter that ended August 2020. Net income grew 11% from the year-ago value to $1.50 billion, while EPS rose 10% year-over-year to $0.95.

Earlier this year, NKE announced senior leadership changes in the company to support Consumer Direct Acceleration. This strategic leadership change will allow the company to accelerate its digital transformation across all operating segments and enhance client experience.

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Buy & Hold Grade: A

In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade takes into account, NKE is pretty well positioned. The stock is currently trading just 0.8% below its 52-week high of $140.57, which it hit on December 9^th.

The company’s net revenue grew at a CAGR of 2.8% over the past three years. This can be attributed to the company’s growing platform and product innovations coupled with its digital acceleration.

Peer Grade: A

NKE is currently ranked #1 out of 34 stocks in the Athletics & Recreation industry. Other popular stocks in this group are Brunswick Corporation (BC), Foot Locker, Inc. (FL) and Fitbit, Inc. (FIT).

FL, BC, and FIT gained 22%, 28.5%, and 8.8% over the past year, respectively. This compares to NKE’s 42.6% return over this period.

Industry Rank: A

The Athletics & Recreation industry is ranked #8 out of the 123 StockNews.com industries. The companies in this industry produce and sell athletic footwear, apparel, equipment, boats, hunting equipment, and accessories for men, women, and kids worldwide through retail outlets and online platforms.

This industry has reaped the benefits of more customers relying on at-home workouts during the pandemic, and opting for comfortable athletic wear over other apparels. As fitness freaks and health-focused people stay indoors due to the coronavirus pandemic, the demand for athletic apparels and fitness gear products are expected to surge in the upcoming months.

Overall POWR Rating: A (Strong Buy)

NKE is rated a “Strong Buy” due to its impressive financials, short-and-long-term bullishness, solid price momentum, and underlying industry strength, as determined by the four components of the POWR Ratings.

Bottom Line

Based on the factors discussed here, NKE is well positioned to soar in upcoming months despite already gaining 42.6% over the past year. As the company is expected to report impressive revenue and earnings growth in its upcoming quarterly report, it could be wise to bet on the stock right now.

Analyst sentiment, which gives a good sense of a stock’s future price movement, is pretty impressive for NKE. It has an average broker rating of 1.44, indicating favorable analyst sentiment. Out of 33 Wall Street analysts that rate the stock, 11 rate it a “Strong Buy.”

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NKE shares were trading at $137.68 per share on Wednesday morning, down $1.71 (-1.23%). Year-to-date, NKE has gained 37.19%, versus a 16.69% rise in the benchmark S&P 500 index during the same period.

About the Author: Imon Ghosh

Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...