Proactive Investors - Nike Inc (NYSE:NKE, ETR:NKE)'s fiscal third quarter profits are expected to take a hit from previously announced restructuring charges amid declining sales, Bank of America (NYSE:BAC) Securities analysts believe.
Ahead of Nike’s results, due on Thursday, March 21, after the stock market closes, the analysts lowered their price objective on the stock from $125 to $120. Nike shares traded hands at $99 on Monday afternoon.
The BofA analysts see Nike posting earnings per share (EPS) of $0.50, including a $0.23 cost from the restructuring charges compared to the consensus estimate of $0.74, which they believe mostly excludes the charges. This marks a decline from $0.79 in the year-ago quarter.
They see sales down 1.6% year-over-year in line with Nike’s "slightly negative" guidance.
Revenue, per the consensus, is expected to come in at $12.3 billion, representing a 0.8% year-over-year decline from $12.4 billion for the same quarter last year.
The BofA analysts see Nike reiterating its fiscal 2024 guidance.
“We think Nike is on the right trajectory to reach its fiscal 2024 gross margin target of 45% this year as it benefits from lower freight costs and lower markdowns,” they wrote in a note to clients.
“The level of recapture beyond fiscal 2024 will depend on Nike’s ability to control promotions and deliver outsized growth in China, both remain key questions.”
Looking further ahead to 2025, the bank’s analysts have trimmed their EPS estimate by 4% to $4.12 to reflect lower sales growth in China.
“We remain ‘Neutral’-rated and think momentum with innovation, wholesale, and China are needed to spark a positive earnings revisions cycle,” they wrote.
They see proof Nike is launching innovation sufficient to drive a sales inflection as a key catalyst to jumpstart the stock. They expect updates on the company’s growth strategies around key initiatives including running, Jordan and Women’s.
“While we think the Summer Olympics in Paris could be a catalyst for product launches, we are more interested in gauging whether Nike can bring innovation that resonates with the everyday customer, not necessarily innovation for the highest performing athlete, which we view as already strong,” they wrote.