Here's what every major analyst expects from Nike's fourth-quarter earnings report

Published Thu, Jun 24 202112:25 PM EDT

Investors should keep buying shares of Nike, Wall Street analysts said, ahead of the company's fourth-quarter earnings report on Thursday after the bell. Shares of the company are up 3.5% since March 25, about the time when Nike and other brands faced a boycott following reports of forced labor in China's Xinjiang region. But the controversy may already be priced into the stock and investors will need to be patient, analysts say. Other key factors investors should watch for surround supply chain issues, inflation and effects of the most recent stimulus. Here's what analysts expect from Nike earnings: "The pullback in Chinese consumerism of Nike products was immediate and dramatic, but since then we believe there has been slow recovery," Barclays analyst Adrienne Yih said in a note. Yih said she was standing by her overweight rating, but wanted more information on Nike's earnings call before adjusting the firm's estimates. Meanwhile, UBS analyst Jay Sole said that he believed investors were looking for a reason to purchase the stock. However, Sole also warned the China issue won't be resolved as quickly as shareholders believe. "This and below consensus guidance probably stop investors from stepping in to buy shares after the news comes out since it will remain unclear when the China issue ends," Sole said. Still, the firm said it liked the company's "robust long-term outlook." While the China news remains concerning, it's a still a "multiyear" buying opportunity, according to investment firm Baird. "Despite near-term uncertainties within China we think the bar for NKE has been lowered significantly in recent months, as buyside expectations have come down faster and further than sell-side consensus," analyst Jonathan Komp wrote. The feeling was similar for Stifel analyst Jim Duffy. The firm pointed to Nike's "global category positioning" and "improved margins" as reasons to own the "core large-cap growth holding," he said. Yet Bank of America said in its preview note the real key is whether Nike provides guidance. That should give investors a clue as to how long the athletic retailer believes the China situation will last, analyst Lorraine Hutchinson wrote. "F4Q results could be a positive catalyst if guidance is strong, but could be disappointing if clarity on China remains elusive," she said. UBS - Buy rating "The pivotal question around Nike heading into earnings is will boycott-related issues in China limit the company's ability to deliver above-expectations guidance? We think the answer is yes and believe this will keep the stock price from rising over the event. We think the ongoing pandemic and low visibility in China will cause Nike to take a very conservative approach to guiding, resulting in an FY22 outlook which implies an EPS range of $3.40 to $3.60 versus the current $3.97 consensus. The key is our conversations with investors suggest very few are unaware of Nike's issues in China. Morgan Stanley - Overweight rating "Covid allowed NKE to further accelerate its direct-to-consumer strategy, improving its [total addressable market], revenue growth, margin profile, & EPS growth opportunity. While we expect ongoing, short-term Covid & China-related headwinds potentially into 1Q of NKE's next fiscal year, management's commitment to and initial execution of its Consumer Direct Acceleration strategy further solidify our belief that the business's long-term revenue, margin expansion, & EPS growth story remains in early innings." Bank of America - Neutral rating "We model an earnings miss based on weak sales in China. We think investors expect this given the negative headlines and stock underperformance through the quarter. The bigger data point, in our view, will be the introduction of F22 guidance, which should provide insight into management's expectations around the duration of the weakness in China. … F4Q results could be a positive catalyst if guidance is strong, but could be disappointing if clarity on China remains elusive." Barclays - Overweight rating "As we head into NKE's FY4Q21, we highlight our lower-than-consensus sales and EPS due to China sales deceleration beginning at the end of March. During that same period of time, U.S. consumer demand reads strengthened with stimulus-driven demand, as vaccines rolled out and schools returned to in-person learning. While we believe NA sales can partially offset China losses, some overhang may flow forward to early FY22. … The pullback in Chinese consumerism of Nike products was immediate and dramatic, but since then we believe there has been slow recovery." Credit Suisse - Outperform rating "While we think Nike trends in North America and Europe were stronger than expected in F4Q, we lower F4QE & FY22E EPS to reflect: negative China trends lasting longer than we initially expected; and our view that Nike will accelerate investments significantly faster than revenues in the near-term. When the Chinese social backlash started in late March, we expected sharp, but brief, sales pressure with sales potentially trending back toward positive by June… so Nike would be able to clearly guide investors back to positive China sales in F1Q at the time of the F4Q." Pivotal - Buy rating "We're very bullish on the company's North American performance for the quarter. More specifically, we believe that March, April and May were particularly strong retail months, benefitting from not only stimulus but also tax refunds and easing Covid restrictions. … Our May Footwear Survey indicated that, even as U.S. consumers are now buying a wider range of footwear, they continue to buy shoes to get outdoors which is right in NKE's sweet spot." BTIG - Buy rating "That said, while we believe NKE can ultimately flex its marketing and innovation muscles to overcome these hurdles and further distance itself from the competition, we could see near term sales volatility in Greater China, the brunt of which is likely to be felt in the next 1-2 quarters, with likely offsets from NA and Europe both of which are on an improving recovery trajectory. … Despite the low visibility near term, we see NKE as distinctly capable of navigating these geopolitical issues." Baird - Outperform rating "Despite near-term uncertainties within China we think the bar for NKE has been lowered significantly in recent months, as buyside expectations have come down faster and further than sell-side consensus. … Still see good multiyear buying opportunity. Importantly, we think signs of recovery in Greater China can become a positive catalyst over the next several quarters. Stifel - Buy rating "The business has capacity for higher sales growth and gross margin expansion, though we expect NKE positions guidance conservatively at the outset of the fiscal year, establishing a beat-raise cadence as FY22 unfolds. Supply chain issues and early quarter demand in Greater China pose two discrete risks, both of which we believe are short-term considerations. … Ultimately, we view NIKE's global category positioning and capacity for improved margins and returns as rationale for the stock to remain a core large-cap growth holding and reaffirm our Buy rating and $168 target price." Telsey - Outperform rating "However, we expect two items that were likely not fully contemplated in the company's guidance to have weighed on Nike's 4QF21 results: 1) a slowdown in sales in China as a result of the political backlash against Western brands beginning in late March; and, 2) higher container costs to transport inventory. These pressures are likely to linger into FY22, and we have revised our estimates lower." Cowen - Outperform rating "There are many moving pieces in the NKE model including an easy comparison from Q4:20 and shipment shifts into Q4:21, but our proprietary data on China through May 2021 is pointing to a continued deceleration in Tmall [a Chinese online retailer] gross merchandise value, negative social media sentiment in China, and poor Baidu search trends. FY22 consensus EPS estimates appear too high."

Workers install a Nike logo lamp outside the Wukesong Arena in Beijing, August 28, 2019.

Tingshu Wang | Reuters

Investors should keep buying shares of Nike, Wall Street analysts said, ahead of the company's fourth-quarter earnings report on Thursday after the bell.

Shares of the company are up 3.5% since March 25, about the time when Nike and other brands faced a boycott following reports of forced labor in China's Xinjiang region. But the controversy may already be priced into the stock and investors will need to be patient, analysts say.

Other key factors investors should watch for surround supply chain issues, inflation and effects of the most recent stimulus.

Here's what analysts expect from Nike earnings: