Time to Buy Nike (NKE) Stock Before Earnings?

Nike (NYSE:NKE) NKE stock popped 2.6% during regular trading Thursday to help the Dow close at its 12th record of 2021. The S&P 500 also jumped to new highs, having recovered all of its recent losses, while the Nasdaq has managed to erase half of its decline. The quick comeback suggests that investors might have overblown inflation worries and the recent selling could have been more about profit-taking from an overheated market.

Even if there is more selling pressure in the near-term, investors might want to consider buying strong stocks that are still trading at a discount. Nike is set to release its third quarter fiscal 2021 financial results on Thursday, March 18, which makes it a solid time to dive into the sports apparel firm.

Still Leading the Race

Despite the rise of Lululemon LULU and a resurgent Adidas (OTC:ADDYY) ADDYY in North America, Nike remains the undisputed giant of the sports apparel and sneaker world. It is no simple task to stay at the top of any industry, much less one as fickle as fashion.

NKE has thrived because of its ability to create trends, constantly adapt, and attach the Swoosh to the biggest sports, athletes, and cultural icons. Nike’s brand carries weight around the world and it has cemented its place alongside Coca-Cola (NYSE:KO) KO, Mc
Donald’s MCD, Apple AAPL, and others.

Like all successful retail businesses, Nike has invested in the future through multiple shopping apps and an impressive digital marketplace that spans from its own websites to social media platforms where people shop directly. Nike is also a mainstay on the massive secondary sneaker market, as it continues to master the art of limited editions and constant updates.

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What Else

NKE has also spent to digitalize its supply chain, including through acquisitions, in order to be more predictive. Nike’s transition to a direct-to-consumer model will help improve its margin, which includes its more streamlined brick and mortar space. This is key given that e-commerce only accounts for roughly 15% of total U.S. retail sales right now.

Nike’s DTC efforts include revamping its own stores to accommodate to changing consumer expectations. The company also remains laser-focused on key hubs for fashion from New York City to Paris. All of these efforts are projected to help the company continue to expand its top and bottom-lines at solid clips for a company of its size and age.

The company’s sales jumped 9% last quarter (period ended on Nov. 30) to help it bounce back after two down periods, as its stores were crushed by the coronavirus. But Wall Street rewarded Nike over the last year for its ability to expand its e-commerce unit, with its Q2 FY21 digital sales up 80%.

Zacks estimates call for NKE’s Q3 revenue to pop 8.4%, with its adjusted earnings projected to slip 4% to $0.75 a share. Peeking ahead, the company’s full-year fiscal 2021 revenue is projected to surge over 15% to $43.12 billion and jump another 11% higher in FY22.

These represent big comebacks from FY20’s 4% decline and both estimates would mark its best revenue growth since 2012. And NKE’s adjusted earnings are projected to skyrocket 85% and 29%, respectively over the next two years.

Bottom Line

NKE’s stagnant earnings revisions help it land a Zacks Rank #3 (Hold) heading into its Q3 release. Meanwhile, the company boasts a solid history of quarterly earnings beats and 15 of the 21 broker recommendations Zacks has for Nike are “Strong Buys.”

Nike stock is up 90% in the last year, as it soared off its coronavirus lows in late March of 2020 along with the rest of the market. The stock did get caught up in the wave of selling, but it has started to bounce back to close regular trading Thursday around 4% off its highs at $141 a share.

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