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Nike earnings to focus on US inflation, China fears

Nike’s share prices, like most US stocks, have had a year to forget. 

So far in 2022, this stock has lost about a third of its value (-33.84%) compared to when the year started. Recently, it has also been posting daily closes below the psychologically-important $100 mark, an event not seen in over two years.

Nike earnings to focus on US inflation, China fears

While this year-to-date downtrend isn’t expected to drastically change anytime soon, Nike’s earnings release after US markets close today (Thursday, 29th September) may inject some near-term volatility.

At the time of writing, markets are forecasting an 8% single-day move on Friday, the day after Nike’s earnings have been released.

Here are some top-line forecasts for Nike’s fiscal first quarter (ending August 31st) results:

  • Revenue: US$12.31 billion (+0.5% year-on-year)
  • EPS (earnings per share): 94c (-19.3% drop year-on-year)

Better-than-expected figures may result in more immediate gains for Nike, while lower-than-expected numbers could drag this stock further below the $100 mark.


Nike faces challenges on multiple fronts

Investors and traders, being the forward-looking creatures that they are, would be particularly interested in what the company says about its outlook on these key issues:

  1. US consumer resilience

The Fed has been raising interest rates to “destroy demand” in the US to rein in inflationary pressures. It remains to be seen how Nike views the future demand for its products among its US customer base, in light of the multi-decade high inflation as well as the prospects of interest rates moving higher over the coming months.

  1. US dollar strength

Note that Nike generates about 60% of its revenue from outside of the US. A stronger US dollar suggests that Nike’s products are becoming less affordable for its global customers, which may translate into lower receipts.

  1. China’s economic recovery

China’s persistence with its Covid Zero campaign has been a thorn in Nike’s side, considering China’s importance in driving the company’s growth. As of its last fiscal quarter, the Greater China area accounted for 16.2% of Nike’s revenue.

While such a number may appear low at first glance, that low-base effect also implies potential for tremendous upside growth out of China – which is what Nike executives are banking on.

However, an uneven post-pandemic recovery in the world’s second largest economy may dampen those hopes in the near-future, depending on the latest guidance out of Nike’s earnings announcements later today.


Nike firmly stuck in downtrend

Looking at the price charts, this stock has been posting a series of lower lows and lower-highs since flirting with the $180 mark back in November.

If market forecasts prove true, an 8% leap to the upside on a positive earnings surprise should propel this stock back into the wide $104-$114 range which was a key summer battleground between bulls and bears.

However, a downbeat announcement from Nike today could see its share prices retesting its lows from June 2020 just above the $90 mark.

Still, Nike’s US$18 billion stock buyback programme, which was announced back in June, may offer some support for this stock.

Overall, keep in mind that Nike is not immune to broader sentiment and depending on the overall risk appetite, this stock could well sway alongside the broader US stock market.



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