Earnings Outlook: Nike preview: Back on track and getting a boost from Colin Kaepernick campaign

Earnings Outlook: Nike preview: Back on track and getting a boost from Colin Kaepernick campaign

Nike Inc. is scheduled to announce its fiscal first-quarter 2019 earnings on Tuesday, and analysts are confident that the athletic giant is scoring points with consumers with its merchandise as well as its controversial Colin Kaepernick advertising.

Nike NKE, +0.33%   ignited a firestorm after announcing a marketing campaign that featured the former NFL quarterback. Shares of the company dropped, but rebounded, and sales jumped 31% over Labor Day weekend after the Kaepernick’s selection as a spokesperson was announced.

Prior to the controversy, Nike faced issues in areas like distribution strategy. But with the release of items like the Air Max 270 and a distribution revamp, Nike has momentum that even calls for a boycott hasn’t dampened.

“While Nike’s recent advertising decisions have attracted unprecedented attention (Google search index setting new all-time highs for the brand), we expect [fiscal first-quarter] results to be much less controversial based on expectations for continued improvement in North America, ongoing strength globally, and good margin performance,” wrote Baird analysts in a note.

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“With fundamentals accelerating and Nike poised to benefit from a strengthening product cycle that could drive stronger sales and margin performance, we see increasing visibility to an earnings acceleration beyond fiscal 2019 which should support premium valuation metrics.”

Baird rates Nike shares outperform with a $90 price target.

Susquehanna Financial Group analysts conducted proprietary checks and found that Nike Sportswear, or NSW, apparel growth is “far more explosive than footwear, and carries higher margins.” NSW merchandise brings together fashion and performance.

“Driving home the complete connection between the women’s NSW apparel and recent ‘Just Do It’ marketing campaign, Jenifer Lewis, star of TV’s ‘Black-ish,’ wore a custom Nike sweatshirt on the red carpet at the Emmy’s earlier this week to show solidarity with the marketing campaign,” Susquehanna analysts wrote. “Further, Nike’s own retail operations are beginning to highlight the NSW and women’s NSW in particular.”

Susquehanna rates Nike shares positive with a $100 price target.

Nike was even upgraded at Canaccord Genuity shortly after the Kaepernick news.

Read: Nike upgraded in the face of Colin Kaepernick ad controversy

Nike has an average overweight stock rating with an $85.33 average price target.

Here’s what to expect:

Earnings: Nike is expected to report earnings of 62 cents per share according to FactSet, up from 57 cents per share last year.

Estimize, which crowdsources estimates from sell-side and buy-side analysts, hedge-fund managers, executives, academics and others, expects per-share earnings of 65 cents per share.

Nike has not missed the FactSet earnings guidance since at least August 2013.

Revenue: FactSet is guiding for revenue of $9.93 billion for the quarter, up from $9.07 billion last year.

The Estimize guidance is for revenue of $9.94 billion.

Nike beat the FactSet revenue guidance for the last three quarters.

Share price: Nike shares have rallied nearly 61% for the last year, and 36.7% for the year to date. The SPDR S&P Retail ETF SPX, +0.20%   has gained 14.6% for 2018 so far, and the Dow Jones Industrial Average DJIA, +0.35%   is up 8% for the period.

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Other issues:

• The latest data from the Consumer Tracker Survey published by Cowen analysts shows that Nike dominates across a number of athletic shoe and apparel categories averaging a 47% share among men and women ages 18 to 34 over the last three months, 44% for middle-income men and 40% for middle-income women.

Both Nike and Under Armour Inc. UA, +3.75% UAA, +3.20%  are also generating better price satisfaction scores.

Cowen rates Nike stock market perform with an $81 price target.

•Morning Consult, a brand intelligence and research technology company, says investors seem “unfazed” by the Kaepernick controversy, and consumer sentiment is coming back after falling in the days after the announcement.

African Americans, young adults and Hillary Clinton supporters say they are “absolutely certain” to buy Nike products while President Donald Trump supporters, whites, rural residents and senior citizens are less likely to make a Nike purchase.

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• In a separate Baird note, analysts say Nike’s prospects in Asia are “pointing positively.”

“Most notably, NKE’s top strategic global footwear supplier remained strong (growth accelerated during FQ1), while a key China athletic retailer has yet to show any material signs of a slowdown (still tracking up double-digits),” the September 17 note said.

Thomson Reuters and StyleSage Co. data shows that there was a decline in discounted Nike shoes and clothing to 30% from 32% from the 10 days before the Kaepernick announcement versus the 10 days after.

And the number of products sold out in the 10 days before the ad versus the 10 days after increased by 61%. Shorts; intimates, sports bras and base layers; and pants were the top sold-out categories.

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