{"id":18265,"date":"2025-06-22T13:41:27","date_gmt":"2025-06-22T19:41:27","guid":{"rendered":"https:\/\/fundamentalis.com\/?p=18265"},"modified":"2025-06-22T13:41:27","modified_gmt":"2025-06-22T19:41:27","slug":"nike-earnings-preview-some-improvement-is-expected-the-7-free-cash-flow-yield-helps","status":"publish","type":"post","link":"https:\/\/fundamentalis.com\/?p=18265","title":{"rendered":"Nike Earnings Preview: Some Improvement is Expected; The 7% Free-Cash-Flow Yield Helps"},"content":{"rendered":"<p>Nike (NKE), the athletic apparel and footwear giant is expected to report their May, &#8217;25, (fiscal Q4 &#8217;25) earnings on Thursday night, after the closing bell.<\/p>\n<p>Analyst consensus is expecting $0.12 in earnings per share on $10.7 billion in revenue, for expected y-o-y declines of -88% and -15% respectively.<\/p>\n<p>If you reread the <a href=\"https:\/\/fundamentalis.com\/?p=17836\">March &#8217;25 earnings preview<\/a> and <a href=\"https:\/\/fundamentalis.com\/?p=17879\">earnings summary<\/a> for Nike (fiscal Q3 &#8217;25), you&#8217;ll see that the inventory liquidation that covered both the November &#8217;24 and March 25 quarter&#8217;s impacted margins severely.<\/p>\n<p>The point being that inventory liquidation is expected to have come to an end in the May &#8217;25 quarter and Nike should show some progress &#8211; albeit small improvement &#8211; with the May &#8217;25 release.<\/p>\n<p>The key then will be how Nike guides for Q1 &#8217;26 (ends August &#8217;25), and for the full fiscal &#8217;26 year.<\/p>\n<p>Q1 &#8217;26 consensus: $0.32 in earnings per share on $10.7 billion in revenue (flat sequentially), on operating income of $536 million, for expected y-o-y growth of -54%, -7% in revenue and -56% in operating income.<\/p>\n<ul>\n<li>If the fiscal Q4 &#8217;25 estimates come in as expected, full-year fiscal &#8217;25 revenue will have fallen 11%, while full-year EPS will have fallen -46%.<\/li>\n<li>If the full-year &#8217;26 consensus expectations come in as expected, fiscal &#8217;26 revenue will be flat y-o-y, will EPS is expected to grow just 2%.<\/li>\n<\/ul>\n<p>While fiscal &#8217;26 is an improvement over a murderous fiscal &#8217;25, it&#8217;s not much in terms of growth.<\/p>\n<ul>\n<li>Nike revenue will have declined (on a y-o-y basis) for 5 straight quarters;<\/li>\n<li>Nike operating income has declined y-oy for 6 of the last 8 quarters;<\/li>\n<li>Nike EPS has declined y-o-y for 9 of the last 14 quarters;<\/li>\n<\/ul>\n<p>Positives:<\/p>\n<ul>\n<li>The biggest positive for me as a shareholder and user of the product, is that Dick&#8217;s Sporting Goods has renewed it&#8217;s commitment to Nike footwear and is once again devoting ample retail space to the brand. I took a walk through a Dick&#8217;s in the western suburbs of Chicago in the last few months, and not only was Nike devoted a lot space in the footwear section, but I saw Nike footwear prominently displayed in some of the sports-specific sections.<\/li>\n<li>While Nike&#8217;s new partnership with Kim Kardashian and Skims is a plus, it&#8217;s launch was recently delayed which pushed the stock down from $63 to $60. The fact is Nike is innovating again, and hopefully this is just the first of some new partnerships influencers and athletes.<\/li>\n<li>Nike&#8217;s cash-flow has held-up better than net income. Nike sports a 7% free-cash-flow yield and Nike&#8217;s &#8220;quality of earnings&#8221; has help quite well despite the drop in the stock. Both TTM (trailing twelve-month) cash-flow and free-cash-flow are better than 1x net income.<\/li>\n<li>The New CEO &#8211; Elliott Hill &#8211; is a plus.<\/li>\n<li>Nike first traded down to $70 per share in July &#8217;24, for the past year it&#8217;s meandered between $60 and the high $60&#8217;s with the exception of the April &#8217;25 flush around Liberation Day. Nike is now oversold on the monthly chart for the first time in it&#8217;s history.<\/li>\n<\/ul>\n<p>The Negatives:<\/p>\n<ul>\n<li>Nike needs to restore the &#8220;energy&#8221; of the brand and get the customer coming back into retail for the brand.<\/li>\n<li>China is a big market for Nike. The tariff issue, on a couple of fronts, could continue to weigh on Nike, and may not be accretive to Nike&#8217;s operations for the next few quarters.<\/li>\n<\/ul>\n<p><em><strong>Summary \/ conclusion:<\/strong><\/em> The biggest plus for Nike (the stock) after the quarterly earnings next Thursday, is that the stock NOT make a new after earnings. In early April &#8217;25 Nike made a series of lows in the $52 &#8211; $53 area during the tariff flush, so a heavy volume trade through $50 would not be a plus.<\/p>\n<p>The 7% free-cash-flow yield, the 2.65% dividend yield and any signs of longer-term improvement, will be a plus for the stock.<\/p>\n<p>It&#8217;s shocking that a brand the caliber of Nike could destroy itself like this in a period of 30 months.<\/p>\n<p>Ultimately, I think we (the shareholders) are betting on Elliott Hill to first right the ship and then start to generate &#8220;Nike-like&#8221; growth in revenue and operating income and earnings per share going forward.<\/p>\n<p>Some improvement this quarter is expected.<\/p>\n<p>None of this is advice or a recommendation, but only an opinion. Past performance is no guarantee of future results.<\/p>\n<p>Thanks for reading.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Nike (NKE), the athletic apparel and footwear giant is expected to report their May, &#8217;25, (fiscal Q4 &#8217;25) earnings on&hellip;<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[11],"tags":[],"class_list":["post-18265","post","type-post","status-publish","format-standard","hentry","category-nke"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"post_mailing_queue_ids":[],"_links":{"self":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/18265","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=18265"}],"version-history":[{"count":8,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/18265\/revisions"}],"predecessor-version":[{"id":18273,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/18265\/revisions\/18273"}],"wp:attachment":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=18265"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=18265"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=18265"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}