Marketmind: Some Relief – But How Long Will it Last?

A look at the day ahead from Dhara Ranasinghe.

U.S. stock futures, the yuan and the risk-sensitive Australian dollar are riding high, while the safe-haven yen and U.S. Treasuries are on the back foot.

Don’t get too comfortable — even if Evergrande makes its Sept. 23 onshore bond payment, it has not indicated whether it can pay $83.5 million in interest due on its March 2022 bond on Thursday. Nor is there any sign the Chinese government plans to mount a last-minute rescue.

And with the U.S. Federal Reserve set to conclude its two-day meeting later on Wednesday, perhaps this week’s market excitement is not over yet.

After all gas prices are at lofty levels, threatening to hurt consumption, which means central banks meeting across the globe this week are likely to be challenged on the message that inflation is transitory.

For the Fed, weaker-than-anticipated jobs numbers have already dampened expectations it will announce an imminent start to tapering bond-buying stimulus.

It might however clear the way for tapering later this year and show in updated projections whether higher-than-expected inflation or a resurgent coronavirus pandemic is weighing more on the economic outlook.

The Bank of Japan just kept monetary policy steady but offered a bleaker view on exports and output, reinforcing expectations it won’t join peers mulling a withdrawal of crisis-mode support.

Elsewhere, Democrats in the House of Representatives passed a bill on Tuesday to fund the U.S. government through Dec. 3 and suspend a borrowing limit until end-2022. Senate Republicans however have vowed to block it.

Key developments that should provide more direction to markets on Wednesday:

– Macy’s to hire 76,000 workers for holiday shopping season

– China keeps lending benchmark LPR unchanged

– DraftKings makes $22.4 bln offer for UK’s Entain

– Euro zone flash consumer confidence

– U.S. existing home sales data

– U.S. sells 2 year FRNs

– Deputy Bank of England governor Sam Woods speaks

– Brazil may raise interest rates by 100 basis points.

– European earnings: Playtech, IG Group

– U.S. earnings: Nike

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Dhara Ranasinghe; editing by Sujata Rao)

Preview: What to Expect From Nike’s Q1 Earnings on Thursday

The world’s largest athletic footwear and apparel seller Nike is expected to report its fiscal first-quarter earnings of $1.12 per share, which represents year-over-year growth of about 18%, up from $0.95 per share seen in the same period a year ago.

The Beaverton, Oregon-based footwear retailer would post year-over-year revenue growth of over 18% to $12.6 billion. In the last four quarters, on average, Nike has beaten earnings estimates over 55%.

According to ZACKS Research, for fiscal 2022, the company expects to grow revenues in the low-double digits, surpassing $50 billion because of strong customer demand across its segments.

The company expects revenue growth in the first half of fiscal 2022 to be higher than in the second half. The foreign exchange rate is expected to be a tailwind in fiscal 2022, generating 70 basis points of gains, ZACKS Research added.

Nike shares surged over 10% so far this year but the stock closed 0.75% lower at $156.42 on Friday.

Analyst Comments

“Investors are focused on the Vietnam factory closures impact on FY revenue guidance. Our analysis & mgmt. guidance conservatism suggests minimal risk. But high valuation requires beat & raise quarters – stock price pullback possible & we’re buyers on any weakness. Reiterate Overweight; raise price target to $221,” noted Kimberly Greenberger, equity analyst at Morgan Stanley.

Nike (NKE) trades at the high end of its historical valuation range, & investors expect quarterly beats & guidance raises. Unchanged or lowered FY guidance on temporary, Vietnam-driven headwinds could result in a stock pullback. We would be buyers on any potential weakness.”

Nike Stock Price Forecast

Twenty-five analysts who offered stock ratings for Nike in the last three months forecast the average price in 12 months of $187.26 with a high forecast of $221.00 and a low forecast of $168.00.

The average price target represents a 19.72% change from the last price of $156.42. From those 25 analysts, 21 rated “Buy”, three rated “Hold” while one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $221 with a high of $410 under a bull scenario and $127 under the worst-case scenario. The firm gave an “Overweight” rating on the footwear and apparel seller’s stock.

Several other analysts have also updated their stock outlook. Cowen and company raised the target price to $196 from $181. Oppenheimer upped the price target to $195 from $150. HSBC lifted the target price to $205 from $162.

“Disruption from COVID-19, supply chain pressure and China continue to escalate. Our contacts across the global supply chain suggest Vietnam could reopen by October. Port congestion and freight headwinds could ease into 2H 2022 and the sector’s 10% valuation correction has improved risk/reward,” noted John Kernan, equity analyst at Cowen.

“We are cutting our FY22 Nike sales estimate by 300bps to 9% growth with a robust recovery into FY23.”

Check out FX Empire’s earnings calendar

Earnings Week Ahead: Lennar, Autozone, FedEx, Nike and Costco Wholesale in Focus

Earnings Calendar For The Week Of September 20

Monday (September 20)

IN THE SPOTLIGHT: LENNAR

Lennar Corp, a home construction and real estate company, is expected to report earnings per share of $3.27 in the fiscal third quarter, which represents year-over-year growth of over 54% from $2.12 per share seen in the same period a year ago.

The Miami, Florida-based company would post year-over-year revenue growth of nearly 24% to around $7.3 billion. For four quarters in a row, the company has exceeded expectations on earnings per share.

“Shares of Lennar have outperformed the industry so far this year. The company is benefiting from effective cost control and focus on making its homebuilding platform more efficient, which in turn resulted in higher operating leverage. Higher demand for new homes backed by declining mortgage rates and low inventory levels bodes well. Focus on the lighter land strategy to boost free cash flow will bolster the balance sheet and thereby drive returns,” noted Analysts at ZACKS Research.

“Moreover, it has provided strong fiscal Q3 homebuilding gross margin guidance, suggesting 420 basis points (bps) increase at mid-point. Also, it has lifted average selling price and margin expectation for fiscal 2021, indicating 6% and 400bps year-over-year growth. However, higher land, labor and material costs are concerning. This may exert pressure on the company’s upcoming quarters as well.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE SEPTEMBER 20

Ticker Company EPS Forecast
LEN Lennar $3.27
HRB H&R Block -$0.34

 

Tuesday (September 21)

IN THE SPOTLIGHT: AUTOZONE, FEDEX

AUTOZONE: The Memphis, Tennessee-based auto parts retailer is expected to report its fiscal fourth-quarter earnings of $29.71 per share, which represents a year-over-year decline of about 4% from $30.93 per share seen in the same period a year ago.

Autozone (AZO) is our top pick in DIY Auto. We see it as a high-quality retailer with the ability to compound earnings/FCF growth over time. While not immune to a tougher macro backdrop (fewer miles driven), we believe AZO is best positioned through any recession given its leading exposure to the more defensive DIY segment (~80% of sales). In addition, its DIFM growth was accelerating pre-COVID and we think it can gain more share in that segment going forward. In our view, ongoing share gains coupled with solid expense management should allow AZO to overcome headwinds from less driving in the near- to medium-term. These advantages seem priced in currently.”

FEDEX: The Memphis, Tennessee-based multinational delivery services company is expected to report its fiscal first-quarter earnings of $5.00 per share, which represents year-over-year growth of about 3% from $4.87 per share seen in the same period a year ago.

The delivery firm would post revenue growth of about 13% to $21.8 billion. In the last four quarters, on average, FedEx has beaten earnings estimates over 28%.

“August quarter remained strong, although we are seeing some delays in shipments, which we expect management to address,” noted Helane Becker, equity analyst at Cowen.

“We are approaching the peak shipping season and expect to see ~50K new hires to handle what is likely to be record demand. Looking ahead, FedEx (FDX) should finally finish the TNT integration; European operations should show that.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE SEPTEMBER 21

Ticker Company EPS Forecast
AZO AutoZone $29.71
FDX FedEx $4.94
ADBE Adobe Systems $3.01
KGF Kingfisher £12.20
CBRL Cracker Barrel Old Country Store $2.33
NEOG Neogen $0.16

 

Wednesday (September 22)

Ticker Company EPS Forecast
KBH Kb Home $1.61
FUL HB Fuller $0.79
BBBY Bed Bath & Beyond Inc. $0.52
UNFI United Natural Foods $0.80
GIS General Mills $0.89

 

Thursday (September 23)

IN THE SPOTLIGHT: NIKE, COSTCO WHOLESALE

NIKE: The world’s largest athletic footwear and apparel seller is expected to report its fiscal first-quarter earnings of $1.12 per share, which represents year-over-year growth of about 18%, up from $0.95 per share seen in the same period a year ago.

The Beaverton, Oregon-based footwear retailer would post year-over-year revenue growth of over 18% to $12.6 billion.

“Investors are focused on the Vietnam factory closures impact on FY revenue guidance. Our analysis & mgmt guidance conservatism suggests minimal risk. But high valuation requires beat & raise quarters – stock price pullback possible & we’re buyers on any weakness. Reiterate Overweight; raise price target to $221,” noted Kimberly Greenberger, equity analyst at Morgan Stanley.

Nike (NKE) trades at the high end of its historical valuation range, & investors expect quarterly beats & guidance raises. Unchanged or lowered FY guidance on temporary, Vietnam-driven headwinds could result in a stock pullback. We would be buyers on any potential weakness.”

COSTCO WHOLESALE: The world’s fifth-largest retailer is expected to report its fiscal fourth-quarter earnings of $3.56 per share, which represents year-over-year growth of over 1.4% from $3.51 per share seen in the same period a year ago. The Fridley, Minnesota-based medical company would post revenue growth of about 18% to around $63 billion.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE SEPTEMBER 23

Ticker Company EPS Forecast
ACN Accenture $2.18
DRI Darden Restaurants $1.64
NKE Nike $1.12
COST Costco Wholesale $3.56
MTN Vail Resorts -$3.46
PRGS Progress Software $0.82

 

Friday (September 24)

Ticker Company EPS Forecast
CCL Carnival -$1.43
CUK Carnival -$1.45
CCL Carnival -£1.45

 

Nike Shares Fall on Global Supply Chain Woes

Supply chain problems have wreaked havoc on companies around the world over the past year. The pandemic-fueled global supply chain issues have thrown a wrench into the operations of companies across sectors.

Worse, global supply chain problems are not going to subside anytime soon, according to high-profile economist Mohamed El-Erian. He predicts that supply chain constraints will stick around for another one to two years, or longer. This is a setback for companies like Nike that are right in the middle of the supply chain disruption.

Wall Street firm BTIG is not optimistic and has downgraded Nike’s stock from buy to neutral as a result. Shares of Nike tumbled more than 2% in response to the downgrade.

Nike’s stock is hovering below its all-time high of $174 and currently trades for just below $160. Investors who believe that Nike will weather the storm and use its pricing muscle to mitigate the damage might see the downturn as a buying opportunity, though it’s unclear where the bottom might be.

Factory Fears

BTIG’s bombshell downgrade was in response to factories in Vietnam that were forced to be shut down due to the spread of the virus, which has had a ripple effect on the supply chain.  BTIG analyst Camilo Lyon wrote in a report,

“We believe the risk of significant cancellations beginning this holiday and running through at least next spring has risen materially for NKE as it is now facing at least two months of virtually no unit production at its Vietnamese factories.”

The factories in question comprise more than half of Nike’s footwear production and nearly one-third of apparel items. The timing couldn’t be worse, with the holiday season right around the corner and vaccinations becoming more prevalent so that retail sales could benefit.

Vietnam is suffering from another wave of the pandemic, particularly in Ho Chi Minh City, which has triggered restrictions in the economy and crippled the manufacturing sector.  A mere 5% of Vietnam’s population has been vaccinated from COVID-19.

Nike Not Alone

While Nike’s issues might begin in Vietnam, the supply chain disruption is a global problem. As a result, other brands are feeling it too. Athletic apparel company Lululemon, for example, experienced a 61% jump in Q2 revenue, but the supply chain is still a worry. They similarly source a good chunk of their apparel from Vietnam and are having to scramble as a result. Nonetheless, Lululemon has a strong sales outlook for 2021.

Today’s Market Wrap Up and a Glimpse Into Friday

Stocks rallied yet again, sending the S&P 500 to its sixth consecutive all-time high. Investors celebrated jobless claims showing that the economy is back on track. Weekly jobless claims came in at their lowest level since the pandemic reared its head.

The Nasdaq also finished higher while the Dow Jones Industrial Average added more than 100 points amid a strengthening economy and a second-quarter earnings parade that is just getting underway.

Energy stocks were a bright spot in the session after WTI crude oil surpassed USD 75 per barrel. Dow member Chevron benefited from the bullish sentiment and tacked on about 1.5%

New in the Hood

The market was abuzz about Robinhood’s IPO filing. The commission-free trading app has been generating revenue hand-over-fist as the retail-investor-fueled meme stock craze has taken shape. Now Robinhood seeks to capitalize on that demand and list on the Nasdaq under a sign-of-the-times trading symbol, HOOD. To demonstrate how popular the app has become, Robinhood generated USD 522 million in Q1 2021 revenue vs. USD 127.6 million in the corresponding year-ago period.

Stocks to Watch

Nike gained 2% on the day after touching on a new all-time high. The sports apparel company turned in impressive sales results and investors expect the momentum to continue.

Walgreens did not receive the same reception on Wall Street even though it also produced a solid quarter. The stock was down 7% in the session despite having lifted its outlook for the year. Investors are still ahead as the stock is up more than 20% year-to-date.

Meme stock AMC Entertainment shed 4% in the session. The stock’s market cap is currently just over USD 27 billion but the company has billions of dollars of debt on its balance sheet. Investors might be starting to think twice about the sustainability of the valuation.

Look Ahead

Investors should keep an eye on Virgin Galactic on Friday.  Billionaire Richard Branson will reportedly head into space on July 11, nine days before rival Jeff Bezos’ space flight. The stock is up more than 4% in extended-hours trading.

On Friday, the much-anticipated Employment Report for June will be released at 8:30 a.m. ET. Wells Fargo predicts that hiring accelerated in June vs. May and that the economy added 750K non-farm payrolls.

Stocks Gear Up for Monday After Record-Setting Performance

Stocks rallied on Friday as investor fears about inflation faded even after the Federal Reserve turned unexpectedly hawkish recently. The S&P 500’s modest gains were enough to send the index to yet another record high, reaching 4,280.70.

Financial stocks helped to catapult the broader market index higher after banks passed the Fed’s stress test with flying colors, giving them the all-clear to distribute dividends and buy back shares once again. May personal consumption expenditures, data that monetary policymakers use to gauge inflation, rose 3.4% YoY, as expected, which helped to tame inflation worries.

The S&P 500 advanced 2.7% for the week, its biggest weekly gain since early 2021. The Dow Jones Industrial Average also closed in the green, fueled by gains of more than 15% in apparel stock Nike. Meanwhile, the Nasdaq took a slight step backward after feeling pressure from higher bond yields.

In early Sunday evening, stock futures are higher across the board as investors look to keep the rally going and potentially send the S&P 500 to another new peak. This week, all eyes will be on Friday’s employment report, but there are some stocks to keep an eye on in the interim.

Stock Spotlight

Nike might have risen by a double-digit percentage on Friday, but there could be more room for this growth stock to run. Not only did Nike see its quarterly revenue about double YoY, but both the company and Wall Street expect the good times to continue.

UBS analysts said in a report that Nike has not yet reached a top, as the company continues to benefit from a shift in consumer behavior toward healthier habits as well as its own digital push. UBS has a price target of USD 185 on the stock, which closed last week at USD 154.

Other Stocks to Watch

  • GameStop muscled its way into the large-cap scene. As expected, the meme stock was added to the Russell 1000 index after qualifying once its market cap ballooned by billions of dollars YTD.
  • On the earnings front, Bed Bath & Beyond, which has attained meme stock status among retail investors, will report its quarterly earnings on Wednesday.

Look Ahead

On the economic front, there are a handful of indicators to watch out for. On Thursday, the Construction Spending report will be released for May. Also on Thursday, investors will get a read on ISM Manufacturing for June after the index beat estimates in May, climbing to a reading of 61.2.

And finally, on Friday, the employment report for June will be released after the economy added nearly 560K new jobs in May. Wells Fargo predicts that the economy added 750K non-farm payrolls in June, according to a report.

Why Nike Stock Is Up By 15% Today

Nike Stock Surges After Strong Quarterly Report

Shares of Nike gained strong upside momentum and moved to all-time highs after the company released its quarterly earnings report. Nike reported revenue of $12.3 billion and earnings of $0.93 per share, easily beating analyst estimates on both earnings and revenue.

The company showed strong growth despite recent problems in China. In fact, there was no mention of boycott in China, and it is clear that this recent incident had no material impact on Nike’s business in the country.

Nike’s brand remains very strong, and the company enjoyed gross margin of 45.8% in its fiscal fourth-quarter as Nike’s digital efforts continued to pay off. The company also noted that it repurchased 50 million of its shares for $4.7 billion during the fiscal fourth quarter.

What’s Next For Nike Stock?

The company’s performance is spectacular, and analysts have already rushed to change their estimates. Currently, analysts expect that Nike will report earnings of $3.9 per share in the current fiscal year and $4.59 per share in the following fiscal year, but these estimates will soon be rewritten.

It is obvious that demand for Nike’s products is very strong while the company managed to use the opportunities presented by the pandemic to accelerate its digital transformation, which had a positive effect on margins.

Currently, the stock is trading at about 33 forward P/E which is a reasonable valuation level for the current market environment, especially if we take Nike’s strong growth into account.

The 15% jump in just one trading session is a huge move for the company whose market capitalization exceeds $200 billion, and it remains to be seen whether Nike stock will be able to gain additional upside momentum in the near term or it will face some resistance due to profit taking. In the long-term, Nike remains fundamentally attractive.

For a look at all of today’s economic events, check out our economic calendar.

Today’s Market Wrap Up and a Glimpse Into Friday

An infrastructure deal was reached in Washington, D.C. and stocks were up on Wall Street. The S&P 500 set a new record high after rising fractionally to 4266.49. The broader market index last reached a new high in mid-June. The recent Fed-induced losses did not last long as investors decided to look at the market glass as half-full.

The Dow Jones Industrial Average isn’t too far from its new all-time high after tacking on about 1% in Thursday’s session. The Nasdaq was fractionally higher. Some of the standouts in today’s session include:

  • Tesla gained 3.5%, extending yesterday’s rally.
  • Caterpillar rose 2.6%, reclaiming some ground it lost on inflation and rate-hike fears last week.
  • FedEx stock is down in extended hours despite experiencing record Q4 earnings and revenue that increased 27%. The company swung to a profit after a quarterly loss in the year-ago period, reporting net income of USD 1.87 billion, or USD 6.88 per diluted share. The transportation company’s services have been in high demand throughout the pandemic, including the delivery of vaccines. The stock is seeing heavy options activity including bullish expectations for shares to gain as much as 18% by the July expiration of contracts.

Stocks to Watch

Nike stock is up 11% in after-hours trading after beating on the top and bottom lines with Q4 results. The company’s results were driven by a recovery in the North American region, where sales grew more than twofold YoY to a new peak of USD 5.38 billion. Nike also experienced robust results in China and its digital sales segment. The trend of comfortable clothing is persisting even after the lockdowns have lifted.

In addition, The Trade Desk, an ad stock, gained 17% today and is trading higher in the after-hours. The stock is benefiting from Google’s decision to delay its move to do away with cookies until 2023. Google is making the change in response to privacy concerns and was initially expected to remove the tracking tech next year.

Look Ahead

On the economic front, personal income and spending for May will be released on Friday. Now that the government stimulus checks are a thing of the past, the expectations are for a further decline in personal income. It will likely not be of the same magnitude as the 13.1% MoM drop in April over March levels, but economists, nonetheless, are expecting a decline. Personal spending is expected to rise slightly.

Nike’s China Sales in Spotlight After Xinjiang Backlash

By Nivedita Balu

While overall results are expected to get a boost as Americans spend their stimulus checks on Air Max and Jordan sneakers, sales growth in China, Nike’s fastest growing business with a roughly 20% share of the total revenue, has shown signs of slowing following the backlash.

Research firm Cowen’s data showed that sales in China were weakening into June, and product sales on e-commerce platform Tmall declined as search trends for “guochao”, Mandarin for homegrown fashion, gained popularity.

Graphic: Nike’s power play in global markets – https://graphics.reuters.com/NIKE-PREVIEW/jbyvrzoqove/chart.png

For an interactive graphic, click: https://tmsnrt.rs/3xQrbll

THE CONTEXT

Earlier this year, Nike and rivals Adidas and H&M, faced heat on Chinese social media after internet users found statements the companies had made in the past on the use of forced labor in Xinjiang. https://reut.rs/2UAKLDJ

Nike has said it does not directly source cotton from the region and confirmed with its contract suppliers that they are not using textiles or spun yarn from the area.

“We could see near-term sales volatility in Greater China, the brunt of which is likely to be felt in the next 1 to 2 quarters,” BTIG analyst Camilo Lyon said.

Nike reports results on June 24.

Graphic: Nike’s domination in the sports footwear market – https://graphics.reuters.com/NIKE-RESULTS/qzjpqxqawvx/chart.png

For an interactive graphic, click: https://tmsnrt.rs/3d5wwgo

THE FUNDAMENTALS

* Nike’s fourth-quarter sales in Greater China are expected to surge about 35% to $2.22 billion, slower than the 50% growth in the previous quarter

* Overall, revenue is expected to grow 74.4% to $11.01 billion from a year ago, when the pandemic was at its peak.

* The blue-chip stock is one of the worst Dow 30 performers this year, down about 6% compared with the index’s 10.9% gain.

WALL STREET SENTIMENT

* The current average analyst rating on NKE shares is “buy” and the breakdown of recommendations is 27 “strong buy” or “buy”, 4 “hold” and 1 “strong sell”

* The median price target is $163.30. The stock closed at $133.10 on Wednesday

QTR ENDING REFINITIV IBES ACTUAL RESULT SURPRISE %

ESTIMATE

Feb. 28 2021 76 cents 90 cents Beat 18.1

Nov. 30 2020 62 cents 78 cents Beat 25.1

Aug. 31 2020 47 cents 95 cents Beat 102.5​

May. 31 2020 7 cents -51 cents Missed -865.4

Feb. 59 cents 78 cents Beat 32.2​

29​ 2020​

Nov. 30 2019 58 cents 70 cents Beat 20.7​

Aug. 31 2019 70 cents 86 cents Beat 22.8

May. 31 2019 66 cents 62 cents Missed -5.9

(Reporting by Nivedita Balu in Bengaluru; Editing by Saumyadeb Chakrabarty)

Nike Q4 Earnings to Rise 200%; Buy with Target Price $164

The world’s largest athletic footwear and apparel seller Nike is expected to report its fiscal fourth-quarter earnings of $0.51 per share, which represents year-over-year growth of 200%, up from a loss of -$0.51 per share seen in the same period a year ago.

The Beaverton, Oregon-based footwear retailer would post year-over-year revenue growth of over 75% to $11.8 billion.

Nike shares slumped over 6% so far this year. The stock was trading 0.34% higher at $132.95 on Wednesday.

Analyst Comments

“There are many moving pieces in the Nike (NKE) model including an easy comparison from Q4:20 and shipment shifts into Q4:21 but our proprietary data on China through May 2021 is pointing to a continued deceleration in Tmall GMV, negative social media sentiment in China, and poor Baidu search trends. FY22 consensus EPS estimates appear too high. We are lowering our price target to $145,” noted John Kernan, equity analyst at Cowen.

Nike Stock Price Forecast

Eighteen analysts who offered stock ratings for Nike in the last three months forecast the average price in 12 months of $164.00 with a high forecast of $192.00 and a low forecast of $140.00.

The average price target represents 23.44% from the last price of $132.86. Of those 18 analysts, 15 rated “Buy”, two rated “Hold” while one rated “Sell”, according to Tipranks.

Morgan Stanley raised the stock price forecast to $185 from $172 with a high of $354 under a bull scenario and $97 under the worst-case scenario. The firm gave an “Overweight” rating on the footwear company’s stock.

“Revenue is a well-understood risk in 4Q, & our predictive model’s outlook has improved. Our online discount tracker suggests GM upside, & SG&A guidance appears conservative, which could drive an EPS beat. ST risk appears priced in per YTD underperformance. Stay OW & raise PT to $185 on lower WACC,” noted Kimberly C Greenberger, equity analyst at Morgan Stanley.

Several other analysts have also updated their stock outlook. UBS cut the price target to $170 from $175. Jefferies raised the target price to $192 from $140. Barclays cut the target price to $165 from $174. Cowen and company slashed the price target to $145 from $155.

Check out FX Empire’s earnings calendar

Earnings to Watch Next Week: Darden Restaurants, Nike, FedEx and CarMax in Focus

Earnings Calendar For The Week Of June 21

Monday (June 21)

There are no major earnings scheduled.

Tuesday (June 22)

Ticker Company EPS Forecast
SMDS Ds Smith £12.65
KFY Korn Ferry International $0.98
AVAV AeroVironment $0.81
KWHIY Kawasaki Heavy Industries ADR -$0.16

Wednesday (June 23)

Ticker Company EPS Forecast
PDCO Patterson Companies $0.51
INFO IHS Markit Ltd $0.80
WGO Winnebago Industries $1.76
KBH Kb Home $1.33
FUL HB Fuller $0.92
OMVJF OMV $0.97

Thursday (June 24)

IN THE SPOTLIGHT: DARDEN RESTAURANTS, NIKE, FEDEX

DARDEN RESTAURANTS: The Orlando-based restaurant operator is expected to report its fiscal fourth-quarter earnings of $1.76 per share, which represents year-over-year growth of about 242%, up from a loss of -$1.24 per share seen in the same period a year ago.

The multi-brand restaurant operator would post year-over-year revenue growth of nearly 70% to $2.16 billion. In the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 270%.

“Best in class casual dining operator with strong brand portfolio. As the largest CDR operator, DRI has substantial scale advantages in shared services which can be levered in a post-COVID-19 environment by improving margins and gaining market share. Lead brand Olive Garden (~50% of sales) garners top consumer scores, its comp sales have historically outpaced the industry and recent cost savings have improved unit economics,” noted John Glass, equity analyst at Morgan Stanley.

“Acquisition of Cheddar’s has been more challenging than initially expected, though still provides longer-term growth potential. Strong position relative to peers, scale, operational leadership, unit growth and structurally higher margins drive our OW rating.”

NIKE: The world’s largest athletic footwear and apparel seller is expected to report its fiscal fourth-quarter earnings of $0.51 per share, which represents year-over-year growth of 200%, up from a loss of -$0.51 per share seen in the same period a year ago.

The Beaverton, Oregon-based footwear retailer would post year-over-year revenue growth of over 75% to $11.8 billion.

“There are many moving pieces in the Nike (NKE) model including an easy comparison from Q4:20 and shipment shifts into Q4:21 but our proprietary data on China through May 2021 is pointing to a continued deceleration in Tmall GMV, negative social media sentiment in China, and poor Baidu search trends. FY22 consensus EPS estimates appear too high. We are lowering our price target to $145,” noted John Kernan, equity analyst at Cowen.

FEDEX: The Memphis, Tennessee-based multinational delivery services company FedEx is expected to report its fiscal fourth-quarter earnings of $4.97 per share, which represents year-over-year growth of over 96% from $2.53 per share seen in the same period a year ago.

The delivery firm would post revenue growth of over 20% to $21.47 billion. In the last four quarters, on average, FedEx has beaten earnings estimates over 41%.

“We expect a beat for F4Q21 as many of the LTM trends we have seen will continue. However, more than ever, 4Q results are likely not as important as the FY22 guide, which will be the critical test of how much of the pandemic tailwinds mgmt. believes are sustainable (and deserves to be priced in),” noted Simeon Gutman, equity analyst at Morgan Stanley.

“We see EBIT growth through YE of FY21 driven by both margin improvement and vol. driven rev. growth which is helped by limited Airfreight capacity and an eCommerce surge, though yields are mixed. We continue to see secular threats to Parcel and remain skeptical that these trends will be sustainable but believe that until there is evidence of a reversal in earnings momentum, the stock can trade at its historical multiple (14-15x PE) on current EPS.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JUNE 24

Ticker Company EPS Forecast
ACN Accenture $2.24
DRI Darden Restaurants $1.76
WOR Worthington Industries $1.68
NKE Nike $0.51
FDX FedEx $4.97
SNX SYNNEX $1.93
BBBY Bed Bath & Beyond Inc. $0.08

Friday (June 25)

IN THE SPOTLIGHT: CARMAX

The United States’ largest used-car retailer is expected to report its fiscal first-quarter earnings of $1.63 per share, which represents year-over-year growth of over 600% from $0.23 per share seen in the same period a year ago.

The Goochland County-based used car giant would post year-over-year revenue growth of about 92% to $6.19 billion.

“Based on historical & current data, we expect to see strength in used car sales as we move forward, particularly given the shortage of new car inventory, manufacturers pulling back on incentives, and potential tailwinds from de-urbanization, mass transit, ride-sharing, and travel. We expect CarMax (KMX) to successfully execute their Omnichannel strategy, providing both online and physical dealer options to consumer,” noted Adam Jonas, equity analyst at Morgan Stanley.

CarMax (KMX) has consistently generated profitability and has one of the strongest balance sheets amongst the dealers. Long term, we estimate strong growth in same-store sales along new store openings, allowing KMX to achieve operating leverage, with upside from the omnichannel rollout.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JUNE 25

Ticker Company EPS Forecast
PAYX Paychex $0.67
KMX CarMax $1.63

 

Nike’s Long-Term Story Intact, Raises Price Target to $185: Morgan Stanley

Morgan Stanley raised their stock price forecast on Nike to $185 from $172 and said near-term headwinds well flagged but long-term story intact.

The world’s largest athletic footwear and apparel seller Nike is expected to report its fiscal fourth-quarter earnings of $0.51 per share, which represents year-over-year growth of 200% from a loss of $0.51 per share seen in the same period a year ago.

The Beaverton, Oregon-based footwear retailer would deliver +33% y/y revenue growth. Nike shares slumped about 8% so far this year.

Analyst Comments

“Revenue is a well-understood risk in 4Q, & our predictive model’s outlook has improved. Our online discount tracker suggests GM upside, & SG&A guidance appears conservative, which could drive an EPS beat. ST risk appears priced in per YTD underperformance. Stay OW & raise price target to $185 on lower WACC,” noted Kimberly Greenberger, equity analyst at Morgan Stanley.

NKE is in the early innings of transition from a wholesaler to a DTC brand. Success would make it one of few to benefit from the shift to eComm (~15% of ‘20 sales). Its DTC business (~33% of ‘20 sales) should ignite its next phase of margin-accretive revenue growth, driving a 29% 5Y EPS CAGR. NKE also stands to benefit from advancing global consumer activewear demand (due to the WFH-induced preference for comfort-oriented apparel/footwear and increased focus on health & wellness). NKE’s strategic portfolio decisions, tech investments, and supply chain innovation also create LT competitive advantages, and are further supported by an industry-leading balance sheet.”

Nike Stock Price Forecast

Eighteen analysts who offered stock ratings for Nike in the last three months forecast the average price in 12 months of $166.94 with a high forecast of $192.00 and a low forecast of $140.00.

The average price target represents 28.02% from the last price of $130.40. Of those 18 analysts, 15 rated “Buy”, two rated “Hold” while one rated “Sell”, according to Tipranks.

Morgan Stanley raised the stock price forecast to $185 from $172 with a high of $354 under a bull scenario and $97 under the worst-case scenario. The firm gave an “Overweight” rating on the footwear company’s stock.

Several other analysts have also updated their stock outlook. UBS cut the price target to $170 from $175. Jefferies raised the target price to $192 from $140. Barclays cut the target price to $165 from $174. Cowen and company slashed the price target to $145 from $155.

“There are many moving pieces in the NKE model including an easy comparison from Q4:20 and shipment shifts into Q4:21 but our proprietary data on China through May 2021 is pointing to a continued deceleration in Tmall GMV, negative social media sentiment in China, and poor Baidu search trends. FY22 consensus EPS estimates appear too high. We are lowering our price target to $145,” noted John Kernan, equity analyst at Cowen.

Check out FX Empire’s earnings calendar

Nike Could Miss Second Quarter Estimates

Nike Inc. (NKE) bulls initially downplayed a Chinese social media backlash to March criticism about forced labor in the persecuted Uyghur minority, insisting the sports and apparel giant was too popular for a government-fueled boycott to succeed. However, the stock has continued to lose altitude during the quarter, suggesting potential downside to revenues when the company reports earnings on June 24th.

Chinese Growth at Risk

China revenues increased 42% on a currency-neutral basis in the quarter ending on Feb. 28 (fiscal Q3 2021), offsetting a 10% North American decline that was blamed on “supply chain challenges”. Continued bottlenecks and Chinese anger have forced some analysts to lower Q4 expectations, with consensus now looking for a profit of $0.51 per-share on $11.24 billion in revenue. However, those numbers could still prove too optimistic, given rising political tensions.

BofA Securities Lorraine Hutchinson summed up these headwinds in May, noting “We are bullish on the long-term prospects for Nike’s accelerated innovation, its distribution strategy to increase digital at the expense of undifferentiated wholesale partners and opportunities to use data to drive growth. However, we see risk to estimates from softness in China. While investors are well aware that Q4 will be hurt by boycotts, uncertainty about the duration of the weakness, the pace of recovery and the margin implications of cleaning up the channel leave us skeptical”.

Wall Street and Technical Outlook

Wall Street consensus has held a ‘Buy’ rating despite current events, based upon 24 ‘Buy’, 2 ‘Overweight’, 3 ‘Hold’, and 1 ‘Underweight’ recommendation. Price targets currently range from a low of $140 to a Street-high $192 while the stock closed Friday’s session more than $8 below the low target. This poor placement tells us that Main Street investors have grown far more skeptical about the China situation than sell-side analysts in lower Manhattan.

Nike returned to the January 2020 high at 105.62 in June and broke out in August, posting superior gains into December’s all-time high at 147.95. Price action since that time has carved a series of lower highs and lower lows, dropping the stock into an 8% year-to-date loss. It’s failed five attempts to mount the 50-day moving average during this period while bouncing twice at the 200-day moving average.  It’s now engaged in a third test while accumulation has dropped to a 12-month low, raising odds for a breakdown.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

Best Dividend Stocks June 2021

In my experience, great dividend stocks have a few characteristics: strong fundamentals, increasing dividend distributions over time, and bullish trading activity in the shares.

The hallmark way I go about finding the best dividend stocks…the outliers, is by looking for quiet Big Money trading activity. Oftentimes, that can be institutional activity. I’ll go over why following the Big Money is so important in a bit. But, the 5 stocks I see as long-term dividend growth candidates are ABT, COST, ADI, MCD, & NKE.

Over decades, I’ve learned that the true tell on great stocks is that big money consistently finds its way into the best companies out there… especially dividend paying stocks. Some of the biggest returns ever have come from holding stocks for many years and reinvesting dividends.

I want the odds on my side when looking for the highest quality dividend stocks…and I own many of them.

So, let’s get into it.

Up first is Abbott Laboratories, Inc. (ABT), which is a seller of health care products globally. Their product lines include pharmaceuticals, nutrition, diagnostics, and medical devices.

Let’s first start with the technical picture.

When deciding on a strong candidate for long-term dividend growth, I look for stocks seeing a pullback:

  • 1 month performance (-3.41%)
  • Historical Big Money buy signals

Below are the Big Money signals Abbott Labs has made since 2015. Green bars are showing that ABT was seeing big buy activity according to MAPsignals. Typically, the more Big Money signals, the stronger the stock:

Source: MAPsignals, End of day data sourced from Tiingo.com

On top of technicals, when deciding on the best dividend stock, you should look under the hood to see if the fundamental picture supports a long-term investment. As you can see, ABT has a strong dividend history:

  • 3-year dividend growth rate (+10.8%)
  • Current dividend per share = .45
  • Forward yield = 1.54%
  • 3-year earnings growth rate (+158.04%)

Next up is Costco Wholesale Corp. (COST), which operates membership warehouses in many countries. They offer branded and off-brand retail products.

When deciding on a strong candidate for long-term dividend growth, it’s a good idea to look for many years of dividend increases.

Now let’s look at recent performance:

  • 1 month performance (+4.80%)
  • Historical big money signals

Below are the big money signals that Costco has made since 2015. I expect more buy signals in the years to come.

Source: MAPsignals, End of day data sourced from Tiingo.com

On top of technicals, when deciding on the best dividend stock, you should look under the hood to see if the fundamental picture supports a long-term investment. As you can see, Costco has a nice dividend history. Their earnings growth has been stellar as well:

  • 3-year dividend growth rate (+12.4%)
  • Current dividend per share = .79
  • Forward yield = .82%
  • 3-year earnings growth rate (+14.04%)

Next, I’m looking at Analog Devices, Inc. (ADI), which is a leading semiconductor company. They have a solid dividend history.

When deciding on a strong candidate for long-term dividend growth, recent performance in the shares is important:

  • 1 month performance (+1.92%)
  • Recent Big Money signals

Below are the big money signals that Analog Devices has made since 2015. It’s clear the stock has been in a nice uptrend:

Source: MAPsignals, End of day data sourced from Tiingo.com

On top of technicals, when deciding on the best dividend stock, you should look under the hood to see if the fundamental picture supports a long-term investment. As you can see, ADI has a strong dividend history:

  • 3-year dividend growth rate (+10.7%)
  • Current dividend per share = .69
  • Forward yield = 1.69%
  • 3-year earnings growth rate (+24.62%)

Next, I’m looking at McDonald’s Corp. (MCD), which is a global fast-food franchise company. They operate over 39,000 restaurants globally.

When deciding on a strong candidate for long-term dividend growth, recent muted performance is not a bad thing:

  • 1 month performance (-.07%)
  • Recent Big Money signals

Below are the Big Money signals that McDonald’s has made since 2015.

Source: MAPsignals, End of day data sourced from Tiingo.com

On top of technicals, when deciding on the best dividend stock, let’s check up on the fundamentals. As you can see, McDonald’s has a strong dividend history.

  • 3-year dividend growth rate (+9.6%)
  • Current dividend per share = 1.29
  • Forward yield = 2.2%
  • 3-year earnings growth rate (+.9%)

Lastly, I’m looking at NIKE, Inc. (NKE), which is a leading athletic footwear and apparel company.

When deciding on a strong candidate for long-term dividend growth, I like to look for recent leaders:

  • 1 month performance (+2.07%)
  • Historical Big Money signals

Below are the Big Money signals that NIKE has made since 2015.

Source: MAPsignals, End of day data sourced from Tiingo.com

On top of technicals, when deciding on the best dividend stock, you gotta see if the fundamental picture supports a long-term investment. NIKE has been a steady grower:

  • 3-year dividend growth rate (+10.9%)
  • Current dividend per share = .275
  • Forward yield = .81%
  • 3-year earnings growth rate (+8.22%)

The Bottom Line

ABT, COST, ADI, MCD, & NKE represent solid dividend choices. Given the strong historical dividend growth and Big Money signals, these stocks could be worth an extra look for a dividend investor.

Disclosure: the author holds long positions in personal and managed accounts in COST and long positions in managed accounts in ADI & NKE. He holds no positions in ABT & MCD at the time of publication.

To learn more about the MAPsignals process, click here: www.mapsignals.com

Disclaimer

https://mapsignals.com/contact/

For a look at all of today’s economic events, check out our economic calendar.

Nike Wins Halt to Sales of Lil Nas X ‘Satan Shoes’

By Jonathan Stempel

U.S. District Judge Eric Komitee in Brooklyn ruled three days after Nike sued MSCHF Product Studio Inc, claiming that the black-and-red, devil-themed sneakers, which carry the Nike “swoosh” logo, infringed its trademarks.

The sneakers are customized versions of the Nike Air Max 97 sneakers that purport to contain one drop of human blood in the midsoles, and are printed with “Luke 10:18,” a biblical passage referring to Satan’s fall from heaven.

Only 666 pairs, costing $1,018 each, were made. Lil Nas X, known for the song “Old Town Road,” was planning to select who gets the 666th pair, but that plan was shelved following Nike’s lawsuit filed on Monday. He is not a defendant in the case.

“MSCHF strongly believes in the freedom of expression,” the company said in a statement. “We look forward to working with Nike and the court to resolve this case in the most expeditious manner.”

Nike and its lawyers did not immediately respond to requests for comment.

MSCHF’s lawyers had argued that Satan Shoes were “not typical sneakers, but rather individually-numbered works of art,” following on the company’s “Jesus Shoes” based on the same Nike model in 2019.

They said a temporary restraining order was unnecessary because shoe buyers would not think Nike was involved, and all but the 666th pair had already been sold and no more were being made.

Nike’s lawyers, in contrast, said “even ‘sneakerheads’ were actually confused by MSCHF’s shoes,” and MSCHF had a “history” of shipping infringing shoes faster than courts could stop it.

Lil Nas X last month released a devil-themed video for his song “Montero (Call Me By Your Name).”

(Reporting by Jonathan Stempel in New York; Editing by Dan Grebler)

Nike Under Pressure After Social Media Firestorm

Dow component Nike Inc. (NKE) is trading lower by more than 5% in Thursday’s pre-market after Chinese social media reacted with anger to a company statement criticizing the use of Uyghur forced labor in the Xinjiang region. The release denied the use of materials or labor from the region while raising human rights concerns. The decline signals shareholder anxiety about China’s $4.6 billion contribution to annual sales and the potential for boycotts or banishment.

Chinese Rage

Beijing puppet strings were evident in Weibo Inc.’s (WB) Twitter-like social interface but intense Chinese nationalism played a major role as well, with a deep distrust of foreigners who seek to influence national policy. Even so, Nike had to act after a February 2020 Australian Strategic Policy Institute report of forced labor and the company’s participation resurfaced, generating lawsuits and complaints from human rights organizations.

Nike outright denied the allegations, noting “We have been conducting ongoing diligence with our suppliers in China to identify and assess potential forced labor risks related to employment of Uyghurs, or other ethnic minorities from XUAR, in other parts of China. Based on evolving information, we strengthened our audit protocols to identify emerging risks related to potential labor transfer programs. Our ongoing diligence has not found evidence of employment of Uyghurs, or other ethnic minorities from XUAR, elsewhere in our supply chain”.

Wall Street and Technical Outlook

Wall Street has been kind to the apparel giant despite missing Q3 2021 revenue estimates last week, with a consensus ‘Buy’ rating based upon 26 ‘Buy’, 3 ‘Overweight’, 3 ‘Hold’, and 1 ‘Underweight’ recommendation. Price targets currently range from a low of $149 to a Street-high $189 while the stock is set to open Thursday’s session at least $13 below the low target. This disconnect with Main Street suggest that analysts have dropped the ball in recent months.

The stock broke out above January 2020 resistance in August, entering a trend advance that added more than 40% into December’s all-time high at 147.95. Two breakout attempts into March have failed while accumulation-distribution readings have dropped to the lowest lows since August, when Nike was trading more than 25 points lower. This rush for the exits is now taking a toll, raising odds for a breakdown that eventually tests breakout support near 100.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Why Shares Of Nike Are Down By 4% Today?

Nike Video 19.03.21.

Nike Stock Falls As The Company Misses Revenue Estimates

Shares of Nike gained downside momentum after the company released its quarterly earnings report. Nike reported revenue of $10.4 billion and GAAP earnings of $0.90 per share, missing analyst estimates on revenue and beating them on earnings.

The company’s total revenue increased by 3% compared to the previous year while the revenue of its North American segment declined by 10% due to supply chain challenges. The main problem was the closure of multiple company-owned stores due to virus-related restrictions. Not surprisingly, the company’s inventories increased by 15% compared to the prior year period.

Nike noted that it was going to resume share repurchases under its existing share buyback program which may provide some support to the stock. Meanwhile, it looks like the market expected strong growth for Nike so the stock got hurt by the company’s problems in North America.

What’s Next For Nike?

At this point, the problems of the company’s North American segment look temporary as mass vaccination program in the U.S. is moving fast. In addition, the new round of economic stimulus will likely provide material support for consumer goods companies like Nike.

At the same time, it should be noted that Nike’s shares are not cheap. The stock is currently trading at about 35 forward P/E. Such valuations are often seen in the current market environment but they imply strong growth. If the market starts to question Nike’s ability to continue its growth at a fast pace, the stock may find itself under pressure.

I’d also note that the stock may benefit from the inflationary environment in case inflation starts to pick up as expected by the bond market. Nike has solid pricing power due to the strength of its brand so it should have sufficient opportunity to boost its revenue in an inflationary environement.

For a look at all of today’s economic events, check out our economic calendar.

Nike Shares Slump as Q3 Revenue Disappoints; Target Price $166

Nike Inc’s shares traded lower on Friday after the footwear seller reported lower-than-expected revenue in the fiscal third quarter as disruption related to the COVID-19 pandemic hit sales in North America and EMEA.

The Beaverton, Oregon-based company said its revenue rose 2.5% to $10.36 billion year-on-year, largely missing Wall Street’s consensus estimates of $11.02 billion. That was primarily due to declines in our wholesale business caused by timing of shipments due to global container shortages and port congestion delays in the U.S. and mandatory store closures in Europe.

Nike shares, which surged about 40% in 2020, traded over 4% lower at $137.31 on Friday.

However, the company managed to report quarterly adjusted earnings of $0.90​ per share, higher than the market expectations of $0.76 per share.

Analyst Comments

“Affected by both the pandemic and shipping issues, wide-moat Nike’s 3% sales growth in the third quarter of fiscal 2021 fell short of our 9% forecast. However, its profitability shined, with gross and operating margins of 45.6% and 16.2%, respectively, surpassing our 44.5% and 13.2% estimates. Although inventory shortages impacted sales, we see them as temporary and not reflective of high underlying demand. This stance is reflected in Nike’s guidance of 75% sales growth (against an easy comparison due to the outbreak last year) for the fourth quarter versus our prior 66% estimate. Thus, we expect to lift our per share fair value estimate on Nike of $113  by a  mid-single-digit percentage but view its shares (which have roughly doubled over the past year) as overvalued,” noted David Swartz, equity analyst at Morningstar.

“While we anticipate that the rate of growth of e-commerce will slow as the pandemic fades, we view Nike’s goal of generating half of its total sales through digital channels by the end of next year as achievable. To that end, the firm acquired Datalogue (terms undisclosed) last month, its fourth acquisition of a data company in the past few years. We view Nike’s data capabilities as a competitive advantage that supports its brand.”

Nike Stock Price Forecast

Thirty analysts who offered stock ratings for Nike in the last three months forecast the average price in 12 months of $166.14 with a high forecast of $183.00 and a low forecast of $140.00.

The average price target represents a 21.89% increase from the last price of $136.30. Of those 30 analysts, 27 rated “Buy”, two rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $173 with a high of $317 under a bull scenario and $92 under the worst-case scenario. The firm gave an “Overweight” rating on the footwear and apparel seller’s stock.

“We reiterate our Overweight rating, as NKE delivered a high-quality beat this quarter despite several material headwinds. NKE is in the early innings of transition from a wholesaler to a DTC brand. Success would make it one of few to benefit from the shift to eComm (~15% of ‘20 sales). Its DTC business (~33% of ‘20 sales) should ignite its next phase of margin-accretive revenue growth, driving a 29% 5Y EPS CAGR,” noted Kimberly Greenberger, equity analyst at Morgan Stanley.

NKE also stands to benefit from advancing global consumer activewear demand (due to the WFH-induced preference for comfort-oriented apparel/footwear and increased focus on health & wellness). NKE’s strategic portfolio decisions, tech investments, and supply chain innovation also create LT competitive advantages, and are further supported by an industry-leading balance sheet.”

Several other analysts have also updated their stock outlook. Bernstein raised the stock price forecast to $180 from $176. JP Morgan upped the price target to $176 from $170. RBC increased the price objective to $165 from $160. Credit Suisse raised the target price to $176 from $162.

Moreover, Cowen and company increased the target price to $173 from $170. Citigroup upped the price target to $160 from $157. At last, Piper Sandler raised the stock price forecast to $170 from $168.

Check out FX Empire’s earnings calendar

Can Nike’s Share Price Cross the “Jordan” to New Record High?

Nike has enjoyed a stellar rise since the market rout 12 months ago, rocketing 130% since 23 March 2020.

However, that momentum has stalled since registering its highest ever closing price on 11 January 2021, as the stock has remained in a sideways pattern in the two months since. Nike’s year-to-date gains now stand at 2.25%, lagging behind the 7.25% posted by the Dow Jones index and the S&P 500’s 5.5% added so far in 2021.

From a technical perspective, Nike’s share prices are testing the upper limits of its Bollinger band, with momentum indicators turning bullish. Nike bulls would take heart from the stock’s ability to breach the $145 resistance region temporarily on Tuesday, posting a higher high from February’s levels.

You could almost hear Nike bulls cheering the stock on with roars of the company’s slogan, “Just Do It”!

But in order for the stock price to stay up there, or even post a new record high, Nike may need a positive catalyst. And such a catalyst may arrive after markets close on Thursday.

What are markets expecting for Nike’s FYQ3 earnings?

  • Revenue: 9% year-on-year increase to US$11 billion
  • Net income: 11.1% y/y increase to US$1.22 billion
  • Adjusted earnings per share: 4% y/y increase to 76 cents

Nike’s sales growth is expected to be largely powered by the Greater China region, which may have registered a 30% expansion in revenue, according to Bloomberg Intelligence. No surprise there, given China’s 33.8% year-to-date retail sales expansion that it announced on Monday, although the comparison with the same period last year is heavily distorted due to the fact that China was in lockdown in the initial months of 2020.

As of end-November, Greater China contributed about 20% to Nike’s total revenue, which is two percentage points higher than the same period in its 2020 financial year. The US remains Nike’s largest market, accounting for over a third (35%) of total sales in its fiscal second quarter.

Nike’s digital push paying off

Nike’s digital push, a move that was announced back in 2017 to make the company less reliant on brick-and-mortar stores, also helped counter the negative effects from store closures. Digital sales are expected to register another period of double-digit growth, even though the company already stated that more than 90% of Nike’s stores have been open as of their previous quarterly report on 18 December.

Macroeconomic headwinds may weigh on Nike’s fortunes

However, note that the forecasted 9% expansion in the company’s top line for the period may be slightly too optimistic, considering some lackluster macroeconomic data.

During the quarter, the production volume of apparel and leather in the US actually fell 0.5 percent. Also, the February US retail sales data that was just announced on Tuesday came in lower-than-expected, registering a 3% month-on-month contraction compared to January’s revised 7.6% expansion from the month prior. December’s US retail sales also recorded a month-on-month decline of 1.3%.

Noting the broader industry’s declines between December and February, that may colour Nike’s fortunes for the reporting period.

How does Nike’s share price tend to react after its earnings release?

Nike shares have posted single-day advances after three of the past four quarterly earnings releases. Using a longer timeframe, since 2010, the stock has averaged a single-day move of about 5% after its quarterly results were announced.

Keep in mind that Nike is now a mere 1.37% away from its highest ever closing price of $146.79.

Hence, a positive earnings surprise, coupled with a healthy amount of risk appetite in broader markets, could well see a new record high for Nike by the end of the week, provided that the forecasted 5.5% move actually materializes to the upside.

With more of the global economy shedding virus-curbing measures, the world is inching closer towards seeing spectator-filled sports arenas and more live sporting events being broadcasted. That may serve as a tailwind for Nike’s earnings and its share price performance over the coming months.

For more information, please visit: FXTM

Written on 17/03/2021 07:00 GMT by Han Tan, Market Analyst at FXTM

Disclaimer: This written/visual material is comprised of personal opinions and ideas. The content should not be construed as containing any type of investment advice and/or a solicitation for any transactions. It does not imply an obligation to purchase investment services, nor does it guarantee or predict future performance. FXTM, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability for any loss arising from any investment based on the same.

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Nike Set to Report Mixed Quarter

Dow component Nike Inc. (NKE) is trading higher by less than 1% on Tuesday morning in reaction to positive analyst commentary, just two days before the sport apparel giant reports Q2 2021 (Feb) earnings. Professional market watchers are looking for a mixed quarter, with a profit of $0.75 per-share on $10.98 billion in revenue. If met, earnings-per-share (EPS) will mark a slight profit decrease compared to the same quarter in 2020.

Sports’ Return to ‘Normalcy’

2020 revenue suffered from the shutdown of sports venue but Nike used the opportunity to sharply expand its digital footprint, growing a direct sales channel that’s been wildly successful. And we’ve now entered the countdown to sports ‘normalcy’, with packed stadiums and broadcast ratings that should benefit all tiers of the company’s product line. In addition, it can finally get back into the highly-profitable business of sports celebrity endorsements.

Pivotal Research Group analyst Mitch Kummetz cited tight inventory control in his comments, noting, “we are lowering our sales forecast but raising our EPS estimate. We are lowering our sales forecast for two reasons. First, Europe was worse than expected, due to draconian COVID restrictions. Second, we don’t believe that athletic footwear was as strong as last quarter, partly due to a shift in demand to boots. On earnings, we are raising our estimate for one simple reason: better-than-expected GM. In short, promotions were minimal, due to lean inventory.”

Wall Street and Technical Outlook

Wall Street consensus is solid as a rock, maintaining a ‘Buy’ rating based upon 25 ‘Buy’, 3 ‘Overweight’, 3 ‘Hold’, and 1 ‘Underweight’ recommendation. No analysts are recommending that shareholders close positions. Price targets currently range from a low of $140 to a Street-high $185 while the stock is set to open Tuesday’s U.S. session just $5 above the low target. Weak 2020 earnings have impacted this placement but Nike is still trading near an all-time high.

The stock broke out above 2015 resistance in the upper 60s in 2018 and entered a strong uptrend that stalled just above 100 in the first quarter of 2020. The steep pandemic decline tested new support successfully, ahead of a V-shaped recovery wave that mounted resistances in August. The uptrend stalled at 144 in December, giving way to rangebound action that’s generated unusual selling pressure. This aggressive distribution lowers odds for an advance to new highs.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.