Should Investors Buy Nike’s (NKE) Stock for a Rebound Ahead of Earnings?

Given Nike’s entrenched position as the top player in sportswear, the question arises: is now the time to jump aboard the Nike train as the company gears up for its fiscal Q4 earnings announcement post-market on June 27?

Despite Nike’s stellar market share, the stock has been on a downward trajectory this year, with a 13% decline attributed to concerns about slowing revenue growth, particularly in digital sales, amid a challenging macro environment.

Analysts estimate that Nike’s Q4 sales will see a slight uptick to $12.88 billion, compared to $12.83 billion in the previous year. Moreover, a notable surge is forecasted in Nike’s bottom line, with Q4 EPS expected to grow by 28% to $0.85 per share, up from $0.66 a year ago.

Nike has outpaced earnings forecasts for three consecutive quarters. However, the company has only met or surpassed revenue estimates in two of the last four quarterly reports. Attention will be on Nike’s strategy for rolling out new product lines, particularly in its Converse segment, which is anticipated to see a 5% decline in Q4 sales to $557 million.

Projections show Nike’s total sales are expected to increase by approximately 1% in both fiscal 2024 and FY25, reaching around $52 billion. In contrast, its primary competitor Adidas is set to experience a 5% sales increase this year, climbing to $24.36 billion, with an additional 8% growth expected in FY25.

Noteworthy is Nike’s forward earnings multiple of 24.2X, in line with the Zacks Shoes and Retail Apparel Industry average and notably lower than Adidas at 69.7X. Additionally, Nike’s EPS is predicted to rise by 18% in FY24 and another 2% in FY25, reaching $3.90 per share.

Heading into its Q4 report, Nike’s stock holds a Zacks Rank #3 (Hold). The company’s ability to meet or surpass expectations will be crucial for a stock turnaround. Most importantly, investors will monitor if Nike can provide positive guidance that addresses concerns over sluggish sales growth.