Investors are bracing for a subdued earnings report from Nike Inc (NYSE:NKE, XETRA:NKE), with UBS analysts warning the upcoming release is unlikely to shift sentiment meaningfully as demand remains soft across key regions.
UBS said its channel checks point to “lackluster” global sales momentum through March, leading the bank to expect roughly in-line third-quarter earnings per share. However, the brokerage expects Nike’s fourth-quarter outlook to disappoint relative to market expectations, forecasting an implied EPS range of $0.03 to $0.18, below the Street’s $0.23 estimate.
Crucially, UBS does not expect Nike’s guidance to signal a meaningful sequential improvement in sales trends. The firm anticipates fourth-quarter revenue will decline by a low-single-digit percentage year-on-year excluding currency effects, compared with an estimated 3% drop in the third quarter.
“We don’t expect Nike’s print to change sentiment or the stock’s P/E much,” UBS wrote, adding that options markets are pricing in a roughly 7.7% move in the shares following results, which is above the company’s historical average swing of about 6.4%.
Sentiment around the stock has deteriorated in recent months, according to UBS, with positioning data showing Nike is now “short-crowded” relative to both its history and peers. Short interest has risen by about 50 basis points since the company’s last earnings report, while the stock has fallen roughly 19% over the past three months.
Investor concerns center on the pace of Nike’s turnaround in key growth areas, particularly China and its Converse brand, UBS noted. There are also questions about whether the company can sustain momentum in its running category, which had been a relative bright spot.
UBS said expectations for the quarter appear relatively low, with investors looking for third-quarter sales to be roughly flat year-on-year and fourth-quarter guidance pointing to flat to slightly negative growth.
Regionally, analysts flagged weakness across several markets. In the US, direct-to-consumer sales are expected to decline by a mid-single-digit percentage, while European trends are seen coming in below consensus forecasts. Wholesale channels in Europe remain under pressure, and China demand continues to lag.
Online interest also appears subdued, with global Google search trends for Nike falling about 2% year-on-year during the quarter, though that marked an improvement from steeper declines in the prior period.
UBS lowered its price target on Nike to $58 from $62 and maintained a “Neutral” rating.