Published -June 30th, 2023 @ 11:00 AM (GMT+2)

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Nike's Stock Reacts to Q4 Earnings

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Nike Inc. (NYSE:NKE) recently reported its fourth-quarter earnings. While sales outperformed Wall Street's expectations, the profit figures were not up to par, causing the stock to slide by 3% following the announcement.
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The athletic apparel giant's gross margins decreased to 43.6% for the quarter ending on May 31, experiencing a drop from 45% during the same period the previous year. According to Nike, the dip was "primarily due to higher product input costs and elevated freight and logistics costs, higher markdowns and continued unfavourable changes in net foreign currency exchange rates — partially offset by strategic pricing actions."

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Analyst Expectations vs. Actual Figures

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Here's a comparison of Nike's Q4 results with Wall Street expectations based on Bloomberg consensus estimates:

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- Revenue: Reported $12.83 billion, against the expected $12.59 billion

- Adjusted EPS: Reported $0.66, compared to the expected $0.67

- Gross margin estimate: Reported 43.6%, slightly higher than the expected 43.5%

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Analysts Lower Price Targets Amid Concerns

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Leading up to the report, Nike's shares had been stumbling, down by 6% for the year. Concerns of dwindling North American demand and the impact of COVID-19 restrictions on revenue growth in Greater China had analysts reducing their price targets on the company's shares.
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Despite challenges, Nike showed signs of recovery in the Greater China region with sales of $1.81 billion, higher than the anticipated $1.64 billion, marking a 16% increase from a year ago. Furthermore, inventories remained almost flat from last year, signalling a potential improvement in Nike's inventory management.

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Goldman Sachs Maintains Confidence in Nike's Prospects

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In the midst of these market reactions, Goldman Sachs analyst Kate McShane kept her faith in the company, maintaining a Buy rating on Nike and setting a price target of $145.00. This indicates a potential upside of over 16% from current trading levels. This optimism was echoed by other analysts who, on average, set a price target of $131.95, suggesting a strong buy consensus.

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