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Nike (NKE) Q3 Earnings Preview: North America, China, Footwear & More

Benjamin Rains

Shares of Nike NKE have jumped 15% this year to outpace the S&P 500. The sportswear giant is also currently a Zacks Rank #2 (Buy) and its Q3 fiscal 2019 financial results are due out on March 21. This means it is time to see what to expect from Nike’s quarterly earnings, revenue, and key business units, including China.

Quick Overview

Nike has been able to return to growth in the vital North American market on the back of digital expansion and a larger direct-to-consumer push. The Oregon-headquartered firm has rolled out multiple shopping-focused apps and its reach across quickly expanding Instagram FB destroys Adidas ADDYY and Under Armour UAA. The company has also remained a mainstay in professional sports in the U.S.—it is the official sponsor of the NFL, NBA, and soon MLB—as well as international soccer, and much more.

Meanwhile, and maybe just as importantly these days, Nike has cultivated its off the court styles to help it transcend into a fashion brand like never before. The company’s growth in the athleisure market, along with the likes of Lululemon LULU has also helped. And investors should note that Nike CEO Mark Parker has remained committed to a more strategic wholesale business, which includes working with Foot Locker FL, Nordstrom JWN, and Dick’s Sporting Goods DKS.

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Outlook

Nike’s third-quarter fiscal 2019 revenue is projected to jump 5.7% to reach $9.50 billion, based on our current Zacks Consensus Estimate. This would mark a slowdown from Q2’s 10% top-line expansion. Meanwhile, NKE’s full-year fiscal 2019 revenue is expected to pop 7.5% to reach $39.12 billion.

More specifically, our NFM estimates call for Nike’s footwear sales to jump 6.6% to reach $5.97 billion. On top of that, the company’s key North American revenue is projected to climb from $3.57 billion in the year-ago period to reach $3.87 billion. This would mark an 8% jump and nearly match last quarter’s growth. We should note, however, that this is compared to Q3 2018 when North American sales slipped 6%.

Moving on, Nike’s revenue in Greater China is projected to surge 15% from $1.34 billion in Q3 fiscal 2018 to reach $1.54 billion. This would mark the 19th consecutive quarter of double-digit revenue growth in China. But last quarter, Nike saw its sales in the region soar 26%, which means the company might be set to feel the impact of a slowing Chinese economy that has hurt the likes of Apple AAPL, Alibaba BABA, and others.

At the bottom end of the income statement, Nike’s adjusted fiscal Q3 earnings are projected to dip 7.7% to touch $0.63 per share. Despite this excepted decline, the company has seen some positive earnings estimate revision activity recently and its full-year EPS figure is expected to climb 8.6%.

Bottom Line

Another important unit to pay close attention to is Nike’s quickly growing digital business. Unfortunately, our NFM file does have estimates for this division because Nike doesn’t currently break them down. Instead, the sportswear powerhouse reports simple growth percentages as the industry as a whole continues its e-commerce push in the Amazon AMZN age.

Last quarter, Nike’s digital revenues surged 41%, with mobile accounting for over 50% of its digital commerce revenue. Looking ahead, Nike CFO Andy Campion expects that its digital division will make up 30% of Nike’s total business by 2023, compared to roughly 15% in the second quarter.

NKE stock hovered at roughly $85.15 a share in late-afternoon trading Thursday. This represented a 3% downturn from its 52-week high of $87.99 per share. Nike is currently scheduled to report its third-quarter fiscal 2019 financial results after the closing bell on Thursday, March 21.

Make sure to come back to Zacks for a full breakdown of Nike’s actual quarterly metrics then.

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