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. 

Earnings to Watch Next Week: Lennar, Five Below, Dollar General, FedEx and Nike in Focus

Earnings Calendar For The Week Of March 15

Monday (March 15)

Ticker Company EPS Forecast
YALA Yalla $0.12
FCEL Fuelcell Energy -$0.04
YY YY $7.54
HQY Healthequity Inc $0.40
CBPO China Biologic $0.69
NGHC National General $0.73
MNTA Momenta Pharmaceuticals -$0.50
KHOLY Koc Holdings AS $0.55
PKX Posco $1.52
PE Parsley Energy $0.25
WPX WPX Energy $0.04
BEAT BioTelemetry $0.48
JOBS 51job $6.40
BKRKY Bank Rakyat $0.13

Tuesday (March 16)

IN THE SPOTLIGHT: LENNAR

Lennar Corp, a home construction and real estate company, is expected to report a profit of $1.71 per share in the first quarter, which represents year-over-year growth of about 35% from $1.27 per share seen in the same quarter a year ago. In the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 35%.

Miami, Florida-based company would post year-over-year revenue growth of about 14% to around $5.1 billion.

“Shares of Lennar have outperformed the industry in the past six months. 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,” said equity analysts at ZACKS Research.

“Moreover, solid first quarter 2021 guidance indicates margin expansion and deliveries to increase significantly. Also, earnings estimates for 2021 have increased over the past 30 days. However, higher land, labour 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 MARCH 16

Ticker Company EPS Forecast
UTG Unite Group £45.10
GRG Greggs -£10.80
FERGY Ferguson ADR $0.22
JBL Jabil Circuit $0.94
CRWD CrowdStrike Holdings Inc. Cl A $0.09
SMAR Smartsheet Inc. -$0.13
LEN Lennar $1.71
WF Woori Bank $0.75
HTHT China Lodging $2.51
ANTO Antofagasta £0.42
HDS HD Supply Holdings $0.39
WG John Wood Group £0.14

 

Wednesday (March 17)

IN THE SPOTLIGHT: FIVE BELOW

Five Below, a discount retailer that sells products that cost up to $5, is expected to report a profit of $2.11 per share in the fourth quarter, which represents year-over-year growth of over 7% from $1.96 per share seen in the same quarter a year ago. In the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 44%.

The Philadelphia, Pennsylvania-based company would post year-over-year revenue growth of about 25% to around $857.1 million.

FIVE reported strong Holiday sales results in Jan, and 4Q guidance was better than expected. With 4Q largely preannounced, we believe investor focus will turn to the expansion of partnerships (with Bugha here and Andrea Pippins here), Five Beyond progress, and potential guidance. For 4Q, we are estimating EPS to be $2.12, at the high end of mgmt’s guidance of $2.08-2.12 and ahead of cons. of $2.11,” noted Randal J. Konik, equity analyst at Jefferies.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MARCH 17

Ticker Company EPS Forecast
KC Kutcho Copper -$0.84
CTAS Cintas $2.19
WSM Williams Sonoma $3.36
FIVE Five Below $2.11
PD PagerDuty Inc. -$0.11
SMTC Semtech $0.48
TCEHY Tencent $0.50
ILD Iliad €0.75
EGFEY Eurobank Ergasias S.A. ADR $0.01
MLHR Herman Miller $0.58

 

Thursday (March 18)

IN THE SPOTLIGHT: DOLLAR GENERAL, FEDEX, NIKE

DOLLAR GENERAL: The U.S. largest discount retailer by number of stores is expected to report a profit of $2.72 in the fourth quarter, which represents year-over-year growth of over 29% from $2.10 per share seen in the same quarter a year ago.

The company, which offers merchandise including consumables, seasonal, home products and apparel at everyday low prices, would post year-over-year revenue growth of over 15% to around $8 billion.

“We believe cons. ests. for 4Q and next year are likely conservative. We est.4Q EPS of $2.75 vs. cons. of $2.72 and EPS in ’21 of $10.68 vs cons. of $10.04. When DLTR reported 4Q, FD comps were better than expected (+8.1%, ahead of cons. of+6.7%, and above 3Q levels). Note, however, that DG’s comp has outperformed that of FD by ~400bps over the last 11 quarters, on average, and DG’s comp has outperformed that of FD by >600bps through the first three quarters of 2020, on average. Thus, we believe DG’s 4Q comp could be ~12% (or perhaps even higher), given the company exited 3Q with a comp of +14%, discussed,” Jefferies’ Konik added.

FEDEX: Memphis, Tennessee-based multinational delivery services company is expected to report a profit of $3.35 in the fiscal third quarter, which represents year-over-year growth of over 137% from $1.41 per share seen in the same quarter a year ago. In the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 36%.

The package delivery company would post year-over-year revenue growth of over 13% to around $20 billion.

“We expect a modest beat for F3Q21 as peak-season momentum exiting 2020 should help offset a few cost headwinds. However, both numbers and expectations face tough comps and receding momentum in FY22, which will be challenging to overcome. Remain Equal-weight,” Ravi Shanker, 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 (14x PE) on current EPS.”

NIKE: The world’s largest athletic footwear and apparel seller is expected to report a profit of $0.76 in the fiscal third quarter, which represents a year-over-year decline of over 2% from $0.78 per share seen in the same quarter a year ago.

The Beaverton, Oregon-based company would post year-over-year revenue growth of over 8% to around $11 billion.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MARCH 18

Ticker Company EPS Forecast
UTZ Utz Brands $0.10
DG Dollar General $2.72
CMC Commercial Metals $0.51
WB Weibo $0.71
ACN Accenture $1.89
SIG Signet Jewelers $3.59
WOOF VCA $0.12
OLLI Ollies Bargain Outlet Holdings Inc $0.85
FDX FedEx $3.35
NKE Nike $0.76
TOELY Tokyo Electron Ltd PK $0.80
GOL Gol Linhas Aereas Inteligentes -$0.36
AUOTY AU Optronics $0.31

 

Friday (March 19)

Ticker Company EPS Forecast
ERJ Embraer -$0.31
CHL China Mobile $2.01

 

Nike Rallies to All-Time High

Dow component Nike Inc. (NKE) is trading at an all-time high on Monday after beating Q2 2021 top and bottom line estimates by wide margins, posting a profit of $0.78 per-share on an 8.9% revenue increase to $11.24 billion. Digital sales surged an impressive 84%, continuing torrid growth that has accelerated in 2020 due to the pandemic. The company also raised 2021 revenue guidance, despite year-over-year physical traffic declines in most geographical regions.

Rapidly Growing Digital Sales

The loss of 2020 sports seasons weighed on investor sentiment into the summer months but greatly expanded e-commerce offerings have compensated for declining brick and mortar sales. The company now expects that half of total sales will come from digital channels by 2024 or 2025, highlighting the huge impact of the pandemic. Many of these sales are now bypassing third party sellers like Amazon.com Inc. (AMZN), allowing Nike to retain higher profit margins.

Telsey Advisory Group analyst Joseph Feldman raised his target to $175 on Monday, noting that Nike “delivered another strong quarterly performance, helped by its powerful digital business, strong product innovation, and robust membership engagement. Importantly, given the Q2 2021 beat on sales, the company raised its full year revenue outlook for a second consecutive quarter. The better-than-expected sales were fueled by growth in each geographic region, led by China (up 19%) and EMEA (up 12%), as well as digital growth of over 80%”.

Wall Street and Technical Outlook

Wall Street consensus is hugely bullish despite Nike’s high valuation, with a ‘Strong Buy’ rating based upon 26 ‘Buy’, 2 ‘Hold’, and 0 ‘Sell’ recommendations. Price targets currently range from a low of $140 to a Street-high $176 while the stock has opened Monday’s U.S. session just $4 above the low target. This humble placement should offer plenty of upside through the first quarter of 2021, especially when vaccines lower the rate of COVID infections.

The stock completed a round trip into the January 2020 high at 106 in June and broke out of a cup and handle in August. That pattern yields a measured move target near 150 and the stock is trading just six points below that level on Monday morning.  It’s also gained more than 40% so far in 2020, making it a prime candidate for January tax selling pressure. Given those inputs, the best course of action may be to wait for a pullback before jumping on board.

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.

Nike Spikes to Record High on Strong Earnings Beat; Buy with Target Price $176

The world’s largest athletic footwear and apparel seller Nike’s shares surged to an all-time high in extended trading on Friday after the company reported better-than-expected earnings in the second quarter and upgraded their full-year sales forecast.

Nike said its revenue increased nearly 9% to $11.24 billion in the second quarter ended November 30, beating analysts’ consensus of $10.56 billion. The footwear company said its profit jumped 12% to $1.25 billion, or 78 cents per share, higher than the Wall Street estimate of 63 cents per share. The company’s digital sales jumped more than 80%.

“We attribute Nike’s ability to navigate the pandemic well to its large owned and third-party e-commerce (now more than 30% of sales), strong demand for athletic gear during the virus, and the global strength of its brand, the source of our wide-moat rating on the firm. We expect to raise our per share fair value estimate of $107 on Nike by a mid-single-digit percentage but rate its shares, which have soared to all-time highs, as overvalued,” said David Swartz, equity analyst at Morningstar.

Following this release, Nike’ shares jumped about 6% to an all-time high of $144.95 in extended trading on Friday; the stock is up over 35% so far this year.

“While Nike’s outlook for the holiday season and the rest of its fiscal year is clouded by the pandemic, its guidance for fiscal 2021 revenue growth in the low teens is in-line with our prior 13% forecast. Moreover, the apparent efficacy of the vaccines provides hope that store disruptions will abate within a few months,” Morningstar’s Swartz added.

Nike Stock Price Forecast

Twenty-eight analysts forecast the average price in 12 months at $151.61 with a high forecast of $174.00 and a low forecast of $115.00. The average price target represents a 10.44% increase from the last price of $137.28. All those 28 analysts, 26 rated “Buy”, two rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $176 with a high of $325 under a bull-case scenario and $85 under the worst-case scenario. The firm currently has an “Overweight” rating on the athletic footwear and apparel company’s stock.

“Reiterate bullish outlook on Nike’s faster 1H21 snapback & mgmt’s accelerated L-T plan. Valuation exceeds historical highs, but out-year revenue forecasts maybe $1-3B+ too low, implying underestimated earnings power. Positive EPS revisions could continue to drive the stock higher; lift PT to $176,” said Kimberly Greenberger, equity analyst at Morgan Stanley.

Several other analysts have also upgraded their stock outlook. Barclays raised the target price to $174 from $150. BTIG upped the stock price forecast to $162 from $152. Jefferies increased the price objective to $140 from $117. Credit Suisse raised the target price to $162 from $160. JP Morgan upped the target price to $170 from $146. Piper Sandler increased the stock price forecast to $168 from $153.

We think it is good to buy at the current level and target $176 as 100-day Moving Average, and 100-200-day MACD Oscillator signals a strong buying opportunity.

Analyst Comments

“Nike 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 28%+ 5Y EPS CAGR,” Morgan Stanley’s Kimberly Greenberger added.

“Nike 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). Nike’s strategic portfolio decisions, tech investments, and supply chain innovation also creates LT competitive advantages, and are further supported by an industry-leading balance sheet.”

Upside and Downside Risks

Risks to Upside: 1) Faster global activewear market growth. 2) Faster 2H20 wholesale restart. 3) DTC strategy acceleration Market share gains. 4) Supply chain innovation. 5) Sustainable NA segment growth. 6) Better-than-feared COVID-19 impact/potential recession – highlighted by Morgan Stanley.

Risks to Downside: 1) Tariff risk. 2) Competitive risk (ADS). 3) China/international macroeconomic slowdown. 4) NA declines. 5) FX headwinds. 6) ESG mismanagement. 7) Worse-than-feared COVID-19 impact/potential recession.

Check out FX Empire’s earnings calendar

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

Earnings Calendar For The Week Of December 14

Monday (December 14)

No major earnings scheduled for release.

However, it is worth noting HEXO Corp, a Canada-based company that creates and distributes products to serve the Canadian cannabis market, will release its financial results for the fiscal first quarter 2021 on Monday before the stock market opens.

Hexo earnings will provide a direction for the emerging cannabis industry. Failing to grow on earnings and revenue after consolidation, will lead to a worse stock dilution scenario for the company. Hexo’s statement will test market sentiments on Monday for the higher-risk, higher-reward cannabis sector.

Tuesday (December 15)

Ticker Company EPS Forecast
SHB Shaftesbury -£1.52
NDSN Nordson $1.53
HOCPY Hoya Corp $0.74

 

Wednesday (December 16)

IN THE SPOTLIGHT: LENNAR

LENNAR: Lennar, a home construction and real estate company, is expected to report a profit of $2.35 in the fourth quarter, up from $2.13 per share seen in the same quarter a year ago, which would indicate a positive year-over-year growth rate of more than 11%.

According to Zacks Research, equity strategists forecasts full-year earnings of $7.46 per share for the current financial year, with EPS estimates between $7.39 to $7.53. For the next financial year, strategists expect the company will post earnings of $7.97 per share, with EPS estimates between $6.30 to $9.42.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE DECEMBER 16

Ticker Company EPS Forecast
TTC Toro $0.49
ABM ABM Industries $0.70
MLHR Herman Miller $0.57
MU Micron Technology $0.70
AUOTY AU Optronics $0.09

 

Thursday (December 17)

IN THE SPOTLIGHT: FEDEX

FedEx, the world’s leading express delivery company, is expected to report a profit of $3.93 in the second quarter, down from the previous $4.87. The company has a decent earnings history as its bottom line outshined the consensus mark in two of the trailing four quarters and missed the same in the remaining two. The average beat is 37.7%, according to Zacks Investment Research.

The continued surge in e-commerce demand during the current coronavirus-ravaged times is likely to have boosted revenues in the to-be-reported quarter. With the pandemic largely restricting people to their homes, the need for door-to-door delivery of essentials during this unprecedented crisis is rising, according to Zacks Investment Research.

“E-commerce trends remain robust, which should support results, but the bar is much higher too. All eyes will be on two major areas: (1) more evidence of the breaking wave that could set up a challenging F2H21/2022 and (2) what is peak season going to look like as we have even less visibility than usual,” noted Ravi Shanker, equity analyst at Morgan Stanley.

“We expect a beat for F2Q21 vs. current consensus. We are modelling EPS of $4.09 (adj for TNT integration costs), 10% above cons. of $3.73. Our FY21 EPS of $17.80 is slightly below our prior est. of $18.08 but is 12% above cons. of $15.89 (all adj. for TNT integration costs for comparability). The main drivers of the beat are a continued strong pricing environment in Express International esp. in Freight as well as more a more spread out peak season in Ground as retailers attempt to avoid service breakdowns and surcharges. This will benefit volume and F2Q results at the cost of pricing and F3Q results, in our view,” Shanker added.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE DECEMBER 17

Ticker Company EPS Forecast
WB Weibo $0.62
ACN Accenture $2.05
GIS General Mills $0.97
JBL Jabil Circuit $1.27
SAFM Sanderson Farms -$0.03
WOR Worthington Industries $0.69
RLAY Relay Therapeutics Inc. -$0.32
ASEKY Aisin Seiki Co $0.42

 

Friday (December 18)

IN THE SPOTLIGHT: DARDEN RESTAURANTS

Darden, which operates full-service restaurants in the United States and Canada, is expected to report a profit of $0.71 in the second quarter, up from the previous $0.56. The Orlando-based multi-brand restaurant operator has set its Q2 2021 pre-market guidance at 0.65-0.75 EPS.

“Darden will report 2Q21 (November) results on December 18th, before market open. We model adjusted EPS of $0.68, below the midpoint of $0.65 to $0.75 guidance and$0.73 consensus, though our below-consensus positioning is not purposeful. Compared to consensus, we model lower restaurant-level margins of 18.9% vs 19.4% Consensus Metrix, which is partially offset by our lower G&A estimate,” said Andrew M. Charles, equity analyst at Cowen and Company.

“We model a revenue decline of 17.5%, which compares to the guidance of -18% total revenue and Consensus Metrix -17.1% and contemplates Olive Garden and Longhorn same-store sales -15% and -10% vs Consensus Metrix -16% and -11%, respectively. At the time of the1Q21 earnings release, Darden indicated that the company was running modestly ahead of-18% guidance and the guidance contemplated 100 bps of headwind from the Thanksgiving calendar shift. We believe what looked like conservative sales guidance when issued in September now looks fair. Indeed, we point to the stability of sales suggested by industry data from September through November, commentary from Mr. Manocha around dining rooms restrictions helping to transfer sales to off-premise channels, and Darden’s lack of third-party delivery availability amid November’s rise in COVID-19 cases/dining room capacity restrictions,” M. Charles added.

IN THE SPOTLIGHT: NIKE

Nike, the largest seller of athletic footwear and apparel in the world, is expected to report a profit of $0.62 in the second quarter, down from the previous $0.95.

“A faster North America wholesale restart, transitory GM benefits, SG&A control, & lean inventory suggest 2Q upside. Valuation nears highs, but Nike’s more promising revenue and margin outlook post-COVID-19 should continue to drive the stock higher. Lift price target to $165,” noted Kimberly Greenberger, equity analyst at Morgan Stanley.

“Further, despite Nike’s valuation nearing the upper end of its historical range (37x 2022e consensus P/E vs. 19-38x historical range) as well as its impressive YTD stock run (+35% vs. S&P 500 +14% as of 12/4), we see room for additional share price appreciation on 1) positive EPS revisions on potential upside surprise to the upcoming quarter as well as against management’s seemingly conservative full year (May-21 year) guidance (as outlined in our four key points below), 2) Nike’s relevant exposure to activewear, one of the fastest-growing footwear & apparel categories, a trend which has only been accelerated by COVID-19, and should remain an ongoing tailwind, and 3) Nike’s accelerated shift to its DTC channel, and in particular eCommerce, which should enhance its long-term revenue, margin, and EPS growth,” Greenberger added.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE DECEMBER 18

Ticker Company EPS Forecast
DRI Darden Restaurants $0.71
NKE Nike $0.62
CUK Carnival -$1.88
CCL Carnival -$1.88
CCL Carnival -£1.43

 

Nike Fails Second Breakout Attempt

Dow component Nike Inc. (NKE) opened at an all-time high on Monday in sympathy with COVID recovery plays and sold off, failing a breakout above the September high near 130. The turnaround wasn’t a surprise because the failure of professional sports teams to fill stadiums has weighed on fourth quarter performance, even though NFL TV ratings have shown excellent resiliency compared to MLB and NBA misfires.

Professional Sports Weighing on Nike

The turnaround reinforces a holding pattern in place since September and the uncertain impact of the pandemic’s second wave this winter. Everyone hopes that 2021 soccer and baseball seasons proceed on schedule and the 2021 Tokyo Olympics gets off the ground but it could take more than a vaccine to get that accomplished. Even so, Nike is doing a great job building market share through direct e-commerce sales, which have underpinned revenue since the first quarter.

RBC analyst Kate Fitzsimons initiated Nike coverage with an ‘Outperform’ and $145 price target on Thursday, noting “We see NKE as a best-in-class global athletic play, with its Consumer Direct Acceleration strategies supporting a multi-year mid-high teens EPS CAGR through FY26. While shares at 35x earnings suggest that NKE’s strong fundamentals are well appreciated, we believe FY21/22 can see EPS upside as recovery from COVID-related disruption comes through faster and as gross margin comes in better.”

Wall Street And Technical Outlook

Wall Street consensus is highly bullish, with a ‘Strong Buy’ rating based upon 24 ‘Buy’ and 2 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $115 to a Street-high $165 while the stock opened Thursday’s U.S. session nearly $20 below the median $146 target. This placement should offer plenty of upside in reaction to news that brightens the light at the end of the pandemic tunnel.

The stock broke out above the first quarter high at 105.62 in August, triggering a rapid advance into the low 130s in September. October and November breakout attempts have now failed, adding to bearish weekly and monthly relative strength readings. Accumulation peaked in September and has posted two lower highs since that time, raising odds for a decline that fills the unfilled portion of Sept. 23 gap between 117 and 119.

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

U.S. Stocks Set To Open Higher As Nike Smashes Earnings Estimates

Nike Easily Beats Earnings Estimates

S&P 500 futures are up in premarket trading as traders cheer great results from Nike which beat estimates on both earnings and revenue.

Nike reported revenue of $10.6 billion and GAAP earnings of $0.95 per share which were much higher than the analyst consensus which called for revenue of $9.15 billion and earnings of $0.48 per share.

Nike achieved strong growth in its online sales and managed to offset the negative impact of the coronavirus pandemic. Not surprisingly, Nike shares are gaining more than 10% in premarket trading and look ready to open at all-time highs.

Tesla Set To Open Lower As ‘Battery Day’ Failed To Live Up To High Expectations

Tesla shares are down by about 5% in premarket trading as investors were disappointed to hear that they will have to wait several years for new batteries.

In addition, Elon Musk did not offer any specific guidance on the cost and the driving range of the new batteries.

He stated that Tesla could produce a $25,000 car that would be ready to compete with comparable gasoline cars in three years, but investors clearly wanted him to be more specific.

Tesla shares are up more than 400% year-to-date so it was really hard to live up to such high expectations. That said, a continuation of correction in Tesla shares may put some pressure on investor mood in other high-flying tech stocks.

All Eyes On PMI Reports

Today, the U.S. will provide flash readings of Manufacturing PMI and Services PMI for September. Manufacturing PMI is expected to stay unchanged at 53.1 while Services PMI is projected to decline from 55 to 54.7.

PMI reports from other parts of the world indicated that the market should be ready for a negative surprise on the services side. In Euro Area, Services PMI declined from 50.5 in August to 47.6 in September.

Numbers below 50 show contraction so it is clear that Euro Area services segment is already suffering from the second wave of coronavirus. In the UK, Services PMI declined from 58.8 to 55.1.

If the U.S. Services PMI report is better than expected, stocks may get additional support. In the opposite case, the market may find itself under pressure due to worries about the sustainability of economic recovery.

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

Nike Swooshes Higher After Digital Sales Soar

NIKE, Inc. (NKE) shares soared 13% in extended-hours trading Tuesday after the athletic footwear and apparel giant reported a surge in quarterly online sales and remained upbeat about growing demand throughout the upcoming holiday season.

The company posted fiscal Q1 adjusted earnings of 95 cents per share, almost double the Street’s forecast of 48 cents a share. Meanwhile, revenue of $10.59 billion came in comfortably ahead of the $9.15 billion figure analysts had expected. Furthermore, the company also lifted its fiscal full-year outlook. It now expects sales to register in the high single digits to low double digits from the previous year.

Through Tuesday’s close, Nike stock has a $182 billion market cap, yields 0.86%, and trades 16% higher on the year. Over the past three months, the shares sport a 17.69% gain as of Sept. 23, 2020. From a valuation standpoint, the stock looks pricey. It trades at about 47 times projected earnings – 67% above its five-year average multiple of 28.34 times.

Digital Sales Spike

Nike’s Q1 digital sales, which account for roughly 30% of its total quarterly revenue, jumped 82% from a year earlier and 75% from the previous quarter as more shoppers purchased gear online during the pandemic. “We know that digital is the new normal. The consumer today is digitally grounded and simply will not revert back,” CEO John Donahoe told investors during the conference call. In recent years, the company has invested heavily in its website and mobile apps as more consumers move away from department stores and shopping malls.

Wall Street View

Bank of America expects Nike to continue benefiting from consumers’ shift to more solitary leisure activities. “We believe COVID-19 is accelerating the consumer spending shift away from traditional entertainment (e.g. amusement parks, movie theaters, & tourist attractions) and international travel to solitary leisure activities (bicycling, golf, marine, hiking, camping),” the investment bank said in a note cited by Investor’s Business Daily.

Sentiment elsewhere on Wall Street also remains bullish. The stock receives 23 ‘Buy’ ratings, 3 ‘Overweight’ ratings, 4 ‘Hold’ ratings, and 1 ‘Underweight’ rating. Analysts have an average 12-month price target on the stock at $126.07 – nearly 8% above yesterday’s $116.87 close.

Technical Outlook and Trading Tactics

Nike shares have continued trending higher after breaking above multiyear resistance in mid-August. Moreover, aftermarket data indicates the stock will open above $132 Wednesday, taking its price to an all-time high (ATH).

Given the recent runup into the company’s quarterly earnings, don’t be surprised to see profit-taking over the mid- to short-term as traders take some money off the table. Instead of chasing the price, look for a retracement entry back to $105, where previous resistance now acts as support.