What To Expect From Nike’s Stock Post Q4 Results?

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[Note: Nike fiscal year ends in May]

Nike’s stock (NYSE: NKE), a company designing, developing, and marketing footwear, apparel, equipment, and accessory products, is scheduled to report its fiscal 2023 fourth-quarter results on Thursday, June 29. We expect Nike’s stock to trade higher with revenues and earnings beating market estimates marginally. The athleisure giant is grappling with supply chain constraints and a slower-than-expected recovery in China. Being a discretionary company, the company also faces headwinds given the current harsh macro environment. The company’s margins are under pressure because of elevated inventory levels. That said, the company has strong pricing power and a solid balance sheet. Nike has $10.8 billion in cash and short-term investments, still generates $3.8 billion in free cash flow, and has a huge competitive advantage due to its brand and the demand it has been able to build. While the company’s stock could likely be pressured in the short term, the company’s long-term prospects look good. Nike’s revenue for the first nine months of fiscal 2023 continued to rise 11% year-over-year (y-o-y) to almost $38 billion, but net income saw a 12% y-o-y fall, due to higher expenses and supply-chain bottlenecks. Despite the lower profit, Nike continued to generate healthy free cash flow.

Our forecast indicates that Nike’s valuation is $120 per share, which is 10% higher than the current market price. Look at our interactive dashboard analysis on Nike’s Earnings Preview: What To Expect in Fiscal Q4? for more details.

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(1) Revenues expected to beat the consensus estimates slightly

Trefis estimates Nike’s Q4 2023 revenues to be around $11.6 Bil, slightly ahead of the consensus estimate. Nike reported revenues were up 14% year-over-year (y-o-y) adjusted for currency issues to $12.4 billion. The company highlighted progress in terms of direct-to-consumer sales, which jumped 17% y-o-y to $5.3 billion. The strong digital and domestic sales were pivotal to the strong revenue performance as sales in greater China still lagged behind expectations. We have forecast Nike’s Revenues to grow 8% y-o-y to $50.3 billion in FY 2023.

2) EPS to marginally come ahead of consensus estimates

Nike’s Q4 2023 earnings per share (EPS) is expected to come in at 63 cents per Trefis analysis, marginally ahead of the consensus estimate. In Q3, Nike’s net income was down $1.2 billion, or 11% y-o-y. Earnings per share was down 9% y-o-y to $0.79. The company’s margins continued to fall, with gross margins declining 330 basis points y-o-y. Nike has been struggling with margin compression for over a year now, and the company’s earnings growth was negative even though revenues increased by double-digits on a y-o-y basis. Softening profitability reflects higher transportation and logistics costs, markdowns, and foreign exchange headwinds, offset in part by higher selling prices.

(3) Stock price estimate in line with the current market price

Going by our Nike’s Valuation, with an EPS estimate of around $3.18 and a P/E multiple of 37.7x in fiscal 2023, this translates into a price of $120, which is in line with the current market price.

It is helpful to see how its peers stack up. NKE Peers shows how Nike’s stock compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since 2016.

Returns Jun 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 NKE Return 4% -6% 115%
 S&P 500 Return 4% 13% 94%
 Trefis Multi-Strategy Portfolio 5% 15% 260%

[1] Month-to-date and year-to-date as of 6/26/2023
[2] Cumulative total returns since the end of 2016

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