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NIKE Q4 Results Preview: 8th Consecutive EPS In-Store?

The first quarter of 2022 was one for the books and one that many investors no doubt want to forget. Primarily, we have seen deep valuation declines following quarterly reports from many companies due to margin squeeze, geopolitical issues and, of course, a hawkish Fed.

It’s in the rearview mirror, but the second set of quarterly reports for 2022 is fast approaching.

One company, NIKE NKE, will release fourth quarter 2022 results on Monday after the bell rings.

NIKE is the global leader in athletic footwear, apparel, equipment and accessories, with operations in more than 160 countries. With the help of a strong portfolio of brands including Nike Pro, Nike Golf, Nike+ and Air Jordan, the company offers premium, well-designed and high-quality products in line with the latest customer trends.

Let’s take a look at how the company is forming ahead of the quarterly report.

Share performance

Year-to-date, NIKE stocks have been challenging, although that will be the theme for most companies throughout 2022. NIKE stocks have lost more than 30% in value, vastly underperforming the S&P 500.

Image source: Zacks Investment Research

After extending the deadline, the story remains the same. NIKE stocks have struggled over the past year, with a strong downtrend beginning towards the end of 2021 and significantly underperforming the S&P 500.

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Image source: Zacks Investment Research

Insight

Heading into the quarterly report, NIKE is a Zacks #4 ranking (sales) with an overall VGM score of a D. Additionally, the company has an ESP revenue score of -1.6%.

Generally, stocks with a positive ESP score associated with a Zacks rank of #3 (Holding) or higher have an increased chance of registering an EPS beat. However, NIKE does not currently fit within these parameters.

Evaluation

NIKE currently has a forward earnings multiple of 24.3X, which seems slightly pricey. However, the current value is nowhere near 2020 highs of 54.4X and well below its five-year median of 32.4X. Additionally, the value represents a rich 43% premium to the S&P 500 value of 16.9X.

NIKE has a style score of a D for value.

Zacks Investment Research
Image source: Zacks Investment Research

Previous quarterly results

The company has consistently posted strong bottom line results, beating earnings expectations nine times over its last ten quarterly reports – no doubt a major positive that bodes well for the company heading into Monday.

In its last four quarters, NIKE exceeded EPS estimates by 34% on average, and in its most recent quarter, the company exceeded net income estimates by 20%.

The top line also showed strength, with NIKE having beaten top line estimates in seven of its last ten quarters. Additionally, in its most recent quarter, NIKE beat the $10.6 billion revenue estimate by 2.5% and posted quarterly sales of $10.8 billion.

Growth estimates

NIKE is expected to bring in $12.1 billion for the quarter, a slight 2.1% decline in revenue from quarterly sales of $12.3 billion a year ago. However, for the full year, revenue is expected to grow 4.6%, with annual sales estimated at $46.6 billion.

Based on earnings projections, the quarterly estimate of $0.81 per share reflects a slightly concerning 13% drop in earnings from the quarterly EPS figure of $0.93 a year ago. Additionally, analysts have significantly lowered their outlook for the quarter over the past 60 days, pushing the consensus estimate trend down 5.8%.

Zacks Investment Research
Image source: Zacks Investment Research

Conclusion

Overall, the strong and consistent earnings performance bodes well for the company heading into the quarterly release. However, having a Zacks rank of No. 4 (sell) with a negative ESP score on earnings indicates that the company may struggle to exceed EPS estimates – something investors should be aware of.

Additionally, valuation levels also look expensive, another reason why I think investors need to exercise caution and deploy a defense-oriented approach when considering the stock.

For investors looking for exposure to the industry in which NIKE operates, a great bet would be Caleres, Inc. CAL. The company is a Zacks Rank #1 (Strong Buy), and analysts have raised their earnings estimates in almost every period over the past 60 days.

Caleres is a footwear retailer and wholesaler. The Company is involved in the operation of retail shoe stores and e-commerce websites, as well as the design, sourcing and marketing of footwear for women and men.

Year-to-date, CAL shares are up nearly 26%, easily crushing the roughly 20% decline in the S&P 500.

Zacks Investment Research
Image source: Zacks Investment Research

In addition to a very favorable Zacks rating, the company also has a style score of an A for value. CAL’s 6.2X forward earnings multiple is very attractive and represents an attractive 64% discount to the value of the S&P 500.

For the quarter ahead, the consensus estimate trend climbed 27%, reflecting quarterly EPS of $1.32 and strong earnings growth of 11% from the prior year quarter.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.