Nike’s Earnings Are Today. Wall Street Is Wary.

Simultaneously, research firms have been lowering their price target estimates over the past couple of weeks. The average target price for Nike stock is $132.60, according to
FactSet,
down from $136.43 at the end of May. Nike closed 0.5% lower at $113.25 on Wednesday.

Analysts are predicting Nike will post adjusted earnings of 68 cents a share on $12.58 billion in revenue, according to consensus estimates by FactSet.

There’s a good chance the sportswear company could meet those expectations, given that it has trumped both earnings and sales expectations for the past six consecutive quarters, writes Barclays analyst Adrienne Yih. Yih has an Overweight rating on Nike. Last week, she lowered her price target to $127 from $154.

But that won’t be enough to give the stock a much-needed boost, as investors are turn to more pressing issues than earnings.

“Going into NKE’s 4Q print, all eyes are on FY24 guidance, [North America] wholesale and the company’s recent decisions to enter back into certain doors, and the recovery in China,” wrote Deutsche Bank analyst Gabriella Carbone in a note to clients. Carbone rates Nike a Buy, but lowered her price target to $126 from $133 last week.

Undergirding analyst pessimism over Nike are concerns that slowing consumer appetite in North America could lead to a sales deceleration that prompts the company to issue downbeat guidance for the coming fiscal year. Several of Nike’s wholesale partners, including
Foot Locker
(FL), cut fiscal-year guidance during their most recent earnings calls, warning that demand for sportswear was waning. Meanwhile, Nike continues to struggle with elevated inventories in North America, suggesting the company will be forced to keep discounting products to clear warehouses.

While Wedbush analyst Tom Nikic also lowered his price target for the stock last week to $129 from $139, he believes the Street is being overly negative, keeping an Outperform rating on the stock.

“Commentary from wholesale partners, while mixed overall in tone, hasn’t been nearly as draconian as investor sentiment would seem, particularly on the higher end of the distribution spectrum,” Nikic wrote. “In fact, most of NKE’s large, North American wholesale partners had positive commentary about Nike sell-throughs.”

And indeed, these wholesale partnerships could be one of the wild cards that tilts investor sentiment one way or the other. Recently, Nike has rekindled partnerships with retailers it had previously stopped selling to, including
Macy’s
(M) and
DSW.
Investors will closely scrutinize the company’s commentary later today over the long-term strategy behind these relationships—and the margin and sales implications, Carbone wrote.

China is the other wild card. Sales in the Chinese market have been gradually improving as the country’s reopening gains steam. In its latest quarter, Greater China revenue ticked up 1% when adjusted for currency fluctuations. Analysts believe that could be even better this quarter. The question is then whether the strength in China will be enough to offset the weakness in North America.

Nike will report earnings after the close on Thursday, and will host a conference call at 5 p.m. Eastern Time to discuss the results.

Write to Sabrina Escobar at [email protected]