Nike Inc (NYSE:NKE, ETR:NKE) will report its third quarter earnings this week and investors will be more focused on the words rather than the numbers, analysts at Bank of America believe.
“We argue Q3 results will matter less than the message about the product reset cycle and evidence new product is resonating,” analysts wrote in a note to clients.
“Management is moving quickly to reset the marketplace and clear aged inventory to allow a pipeline of new product to hit the market.”
While they do not expect to hear a “major revelation” on product during Nike’s earnings call, the analysts write they would be listening for early product wins, for example in running with the Vomero 18 or Pegasus Premium.
“Signs of product wins will be the singular most important catalyst to reengage investors on the stock, in our view,” they wrote.
For the third quarter, Bank of America expects Nike to report earnings per share of $0.22, below the Wall Street consensus of $0.28.
Nike’s margins could be at risk in the near-term as management remains committed to reducing lifestyle inventory, they added.
“One of the inventory actions is buying back product from retail partners; this will lead to elevated inventory on balance sheet,” they wrote.
“We argue greater near-term margin pain actually improves the set-up for the stock, as this is a sign that [new CEO] Elliot Hill's emphasis on taking swift action to make way for new product is working as planned.”
Management will likely stick with quarterly guidance, they added.
“A lack of visibility on the product reset and consumer spending more broadly could cause management to wait another quarter to offer a fiscal 2026 outlook,” they wrote.
“We think management may provide some context for the expected fiscal 2026 margin recovery, but we would be surprised if explicit fiscal 2026 earnings guidance is communicated.”
The analysts awarded Nike a ‘Buy’ rating and $90 price target. Shares traded hands at about $73 shortly before Tuesday’s closing bell.
Nike will report its Q3 financial results on Thursday, March 20 after US markets close.