Nike (NYSE:) Delivers Mixed Results: What Investors Need to Know
Nike recently reported its earnings after the closing bell on Tuesday, and the results were a mixed bag for investors. Despite a big EPS beat and improved gross margins, the stock took a hit, falling 10%. Let’s break down the key points to help you understand what’s happening with Nike:
### The Bad News:
1. EPS and revenue estimates were slashed after Nike withdrew guidance for fiscal ’25 (ending May ’25).
2. Consensus EPS estimates for fiscal ’25 are now expecting a decline of 28%, a far cry from the 21% growth that was anticipated just 8 quarters ago.
3. Revenue estimates are now projecting a full-year 7% decline in Nike revenue for May ’25.
4. Jefferies analyst does not expect the 120 bp y-o-y increase in Nike’s gross margin to be sustainable.
5. Management noted worse-than-expected declines in Nike Direct and Nike Digital on the conference call.
### The Good News:
1. Despite challenges, Nike is still innovating and seeing growth in key areas like men’s fitness, men’s global football, and men’s and women’s running footwear.
2. Positive reception for Nike’s Spring running products from wholesale partners has been a highlight.
3. SG&A expenses have decreased 7% and 9% y-o-y in the last two quarters, showing some cost control efforts.
### Investor Outlook:
– With the recent drop in Nike shares, the stock is now trading at a much cheaper valuation compared to late ’21.
– Investors are looking for stability in EPS and revenue revisions and a return to growth.
– It may take another 6 months to see if Nike can generate excitement and revenue growth around Spring ’25.
### Expert Analysis:
– The decision to pull ’25 revenue and EPS guidance could give the new CEO, Elliott Hill, a fresh start to set his own expectations.
– Turnarounds can be challenging, but with the right leadership, Nike may be on the right track.
– Technical analysis suggests that a trade below $70 could be a cause for concern.
In conclusion, while Nike faces some headwinds in the short term, the company’s long-term prospects remain promising. Investors should keep an eye on key metrics like revenue growth, EPS stability, and market sentiment to gauge the stock’s performance. Remember, investing always carries risks, and past performance is not indicative of future results. Stay informed and make decisions based on thorough research and analysis.