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Focus on NKE Direct to Consumer (DTC) revenue
Nike Inc. (NKE), the world’s largest athletic-apparel company, announced last month that it would stop selling its merchandise on Amazon.com Inc.’s (AMZN) website in a push to sell more directly to consumers. For that reason, a key focus for investors will be the performance of Nike Direct, the company’s business segment that sells directly to consumers (DTC), when the company reports earnings on December 19, 2019 for Q2 of fiscal year 2020 (FY). Analysts are forecasting rising profits, revenue and also gains in direct sales.
The stock surged in late September after the company reported Q1 earnings for FY 2020 that beat analyst expectations. Nike reported earnings per share (EPS) of $0.86 versus a forecasted $0.71, surprising analyst predictions by 21.1%. That large, positive surprise was welcomed after the previous quarter’s negative earnings surprise.
Earnings in Q1 were up 28.1% from the same three-month period a year ago, which is the highest quarterly year over year (YOY) growth for the company in at least two years. Revenue growth for the quarter came in at 7.2% YOY, lower than that experienced in Q1 of FY 2019.2
Analysts are expecting 10.5% YOY growth in EPS for Q2, which is much more tempered than last quarter and slightly lower than growth in the same period a year ago. Revenue growth is expected to be more in line with last quarter at 7.5% YOY, but also represents a slowdown from the same three-month period a year ago.
|Estimate for Q2 2020||Q2 2019 (FY)||Q2 2018 (FY)|
|Earnings Per Share
|Revenue (in billions)||$10.1||$9.4||$8.6|
|Direct to Consumer (DTC) Revenu (in billions)||$3.1||$2.8||$2.5|
As indicated, the key metric investors will want to watch for is Nike’s DTC revenue, which is expected to rise by 8.4% YOY in Q2. Those would be in line with a general slowing trend in both DTC revenue growth and corporate revenue growth. If Nike is able to outperform in this area, where it has invested more heavily in recent years, the company’s stock could receive a nice boost.
More beautiful companies with lots of potential the next few years you can find in our Selection List: Mainstream, and see our Selection List of 2020 in this Category.