Nike Shares Under Pressure Ahead of Earnings Report
Nike shares came under slight pressure on Monday after UBS warned of a potential negative catalyst from its upcoming earnings report. The bank’s analysts highlighted deteriorating global sales trends, predicting weak third-quarter guidance and earnings-per-share (EPS) projections below market expectations.
UBS estimates Nike’s Q3 implied EPS guidance will range from $0.47 to $0.57, falling short of the market consensus of $0.55-$0.65 and the sell-side forecast of $0.66. The analysts believe this could weigh heavily on Nike’s current valuation, which trades at a 29x forward price-to-earnings ratio.
The bank’s channel checks suggest Nike’s global sales growth trends have deteriorated over the last three months, with weaker U.S. direct-to-consumer sales, underperformance in Europe, and disappointing growth trends in China. Additionally, UBS says Nike’s global Google search trends declined by an average of 8% in Q2, while year-over-year promotional activity increased, further signaling challenges.
Despite underperforming the market by approximately 1,500 basis points over the last three months, UBS noted a “fear of missing out” (FOMO) among some investors, who expect an imminent recovery in Nike’s fundamentals. However, the bank cautioned that these optimistic expectations might be premature.
UBS maintained a Neutral rating on Nike, lowering its price target slightly to $80 from $82, reflecting a valuation consistent with industry peers. Despite the headwinds, the analysts concluded that the market’s faith in Nike and new CEO Elliott Hill will keep the stock from falling too much.