Should you buy Nike shares before they report earnings this week?

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Nike, Inc. (NKE), an athletic footwear and apparel giant, has managed to maintain the top spot in its industry for many years. The company’s online business has exploded during the pandemic as consumers turn to its website and app to buy sneakers and workout clothes.

Despite a global economic recession and major supply chain disruptions for much of this year, NKE recorded impressive growth in profits and sales. The company may even provide better numbers in its next earnings report, as its digital sales continued to soar last quarter, with a growing number of coronavirus cases with each passing day. NKE should publish its results for the second quarter of the 2021 financial year this Friday, December 18e. The current year EPS consensus estimate of $2.88 indicates an 80% year-over-year improvement. The consensus revenue estimate of $41.99 billion for the current year indicates a 12.3% increase over the same period last year.

NKE’s accelerating brand momentum and focus on normalizing market supply and demand has helped it gain 42.6% over the past year. This impressive performance, combined with several other factors, earned NKE a “Strong Buy” rating in our proprietary rating system.

Here’s how our proprietary POWR Ratings system rates NKE:

Commercial Grade: A

NKE is currently trading above its 50-day and 200-day moving averages of $130.68 and $105.67, respectively, indicating that the stock is in an uptrend. Additionally, the stock has gained 16.9% over the past three months, reflecting a solid short-term uptrend.

Nike has stepped up its direct-to-consumer online strategy amid the pandemic, expanding its workout app to boost digital sales. The company’s direct sales grew 13% year-over-year (on a currency-neutral basis) to $3.70 billion in the fiscal first quarter that ended August 2020. Net profit increased 11% from prior year value to $1.50 billion, while EPS increased 10% year-over-year to $0.95 .

Earlier this year, NKE announced changes to the company’s senior management to support Consumer Direct Acceleration. This change in strategic direction will allow the company to accelerate its digital transformation in all operational segments and improve the customer experience.

Purchase and retention grade: A

In terms of proximity to its 52-week high, which is a key factor taken into account by our Buy & Hold Grade, NKE is quite well positioned. The stock is currently trading just 0.8% below its 52-week high of $140.57, which it hit on December 9.e.

The company’s net sales have grown at a CAGR of 2.8% over the past three years. This can be attributed to the company’s growing platform and product innovations associated with its digital acceleration.

Peer Class: A

NKE is currently ranked #1 out of 34 stocks in the athletics and recreation industry. Other popular stocks in this group are Brunswick Corporation (BC), Foot Locker, Inc. (FL), and Fitbit, Inc. (FIT).

FL, BC and FIT have gained 22%, 28.5% and 8.8% respectively over the past year. This compares to NKE’s 42.6% return over this period.

Industry Rating: A

The athletics and recreation industry is ranked No. 8 out of StockNews.com’s 123 industries. Companies in this sector produce and sell men’s, women’s and children’s footwear, apparel, equipment, boats, hunting gear and sporting accessories worldwide through retail outlets and online platforms.

This industry has reaped the benefits as more customers rely on home workouts during the pandemic and opt for comfortable sportswear over other garments. As fitness enthusiasts and health conscious people stay indoors due to the coronavirus pandemic, the demand for sportswear and fitness equipment is expected to increase in the coming months.

Overall POWR rating: A (strong buy)

NKE is rated as a “Solid Buy” due to its impressive financial results, short- and long-term uptrend, solid price momentum, and underlying industry strength, as determined by the four components of POWR ratings.

Conclusion

Based on the factors discussed here, NKE is well positioned to soar in the coming months, despite gaining 42.6% over the past year. With the company expected to report impressive revenue and earnings growth in its upcoming quarterly report, it might be a good idea to bet on the stock now.

Analyst sentiment, which gives a good idea of ​​a stock’s future price development, is quite impressive for NKE. It has an average broker rating of 1.44, indicating favorable analyst sentiment. Of 33 Wall Street analysts who rate the stock, 11 rate it a “strong buy.”

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NKE shares were trading at $137.68 per share on Wednesday morning, down $1.71 (-1.23%). Year-to-date, NKE has gained 37.19%, compared to a 16.69% rise in the benchmark S&P 500 over the same period.

About the Author: Imon Ghosh

Imon is a financial analyst and journalist with a passion for financial research and writing. She started her career at Kantar IMRB, a leading market research and consumer advisory organization. After…

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