Nike, Inc. (NYSE: $NKE) is a renowned American multinational corporation that sells footwear, apparel, equipment, and service design, development, and marketing. Headquartered in Beaverton, OR, Nike is the world’s preeminent athletic shoe and apparel supplier.Â
On Thursday, March 21, 2024, Nike reported impressive fiscal 2024 third-quarter results that defied market expectations. The sportswear giant’s financial performance highlights its successful restructuring efforts and ability to capitalize on holiday discounting strategies.Â
Nike’s Q3 Results Beats Analysts’ ExpectationsÂ
For the third quarter ended February 29, 2024, Nike reported flat year-on-year revenue of $12.43 billion, surpassing Wall Street’s projections of $12.3 billion by 1.1%. Its gross margin saw a significant 150 basis point improvement to 44.8% despite a 50 basis point drag from restructuring charges, a noteworthy improvement from the 43.3% recorded in the same quarter of the previous year.
Nike’s selling and administrative expenses climbed 7% to $4.2 billion, while its diluted EPS came in at $0.77, with $0.21 attributed to restructuring charges. Excluding these charges, diluted earnings per share would have been $0.98, surpassing analyst estimates of $0.75 by 29.9%. The effective tax rate for the period was 16.5%, compared to 16.0% for the same period in the prior year. Net income declined 5%, amounting to $1.2 billion.Â
Balance Sheet and Inventory
The company reported it had $10.6 billion in total cash at the end of the third quarter, declining around $0.2 billion from last year, with cash from operations offset by cash dividends, share buybacks, bond repayment, and cash expenditures. As of the end of Q3, Nike’s inventories totaled $7.7 billion, a 13% decline from the previous year, reflecting a decline in units.
Shareholder Value at the Forefront
In Q3, the company distributed approximately $1.4 billion to shareholders, continuing its record of increasing dividends for 22 consecutive years. This figure comprised $562 million in dividends, a 6% increase compared to the prior year, and $866 million allocated for share repurchases.
Moreover, Nike strategically repurchased 73.8 million shares, amounting to approximately $8.0 billion as of the end of the third quarter. This significant buyback initiative falls under an $18 billion repurchase program approved in June 2022.
Nike’s Q4 Outlook and Strategic PartnershipÂ
For Q4, Nike anticipates a slight revenue uptick, driven by favorable timing of shipments and a slower pace of digital growth due to franchise lifecycle management. However, the stronger U.S. dollar is expected to have a negative impact on reported revenue during this period. For the full fiscal year, Nike projects revenue growth of approximately 1%, which is in line with analysts’ forecast of 1.1%.
In terms of profitability, the company projects gross margins to expand by approximately 1.6%-1.8% for the fourth quarter and around 1.2% for fiscal 2024, below the 1.$%-1.6% expected by analysts.
For fiscal 2025, Nike forecast revenue growth but did not state by how much. Analysts were expecting a forecast of 5.6%.
Additionally, Nike expects selling, general, and administrative (SG&A) expenses to decrease slightly in Q4 compared to the prior year, while full-year growth is anticipated to remain in the low single digits.
Nike also announced a strategic partnership with the German Football Federation, set to commence in 2027. This move further solidifies the company’s commitment to expanding its global reach and strengthening its brand presence in the sports industry.
Nike (NKE) Stock Performance
On Thursday, March 21, 2024, Nike, Inc. (NKE) experienced an after-hours surge of 3.85% in premarket trading, with shares trading at $104.70. However, following the release of the company’s lackluster outlook, the stock fell 8.53% during the morning trading session on Friday, March 22, to $92.22 per share as of 09:50 AM EDT.Â
.Its 52-week change stands at -16.48%, contrasting with the S&P500’s 32.00% gain over the same period. Nike’s 50-day moving average is $102.31, while its 200-day moving average is $104.83. The company’s average trading volume over three months is 8.75 million shares, with 1.22 billion outstanding shares.Â
Analysts Bullish on Nike Stock
Based on recent insights from 28 Wall Street analysts, Nike’s projected 12-month price targets indicate an average of $121.59, with a high forecast of $142.00 and a low forecast of $91.00. This projected average represents a potential 31.11% increase compared to Nike’s current trading price. Notably, 18 analysts are bullish on Nike stock, suggesting it as a buy, while 9 analysts suggest holding positions, and 1 advises selling the stock.
Should You Invest in Nike Stock?
Nike’s third-quarter results demonstrated the brand’s strength, bolstered by effective restructuring initiatives and strategic pricing decisions. While the company’s fiscal 2024 forecast is a challenge, Nike possesses a formidable product lineup, unwavering dedication to operational excellence, and an enduring commitment to generating shareholder value, solidifying prospects for sustained growth. Analysts’ overwhelmingly positive outlook further underscores the company’s promising future, making Nike stock a compelling investment.Â
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