Nike (NKE) shares dropped -3% today following the company’s mixed fiscal fourth-quarter results on Thursday.
Despite not participating in today’s broader rally, investors may be wondering if now is a good time to buy Nike stock.
Let’s take a look at Nike’s Q4 results and earnings outlook to gauge if the recent dip is indeed a buying opportunity.
Nike Q4 Review
Although Nike was able to beat its fourth-quarter sales expectations, the company came up short on its bottom line which is the main catalyst for today’s selloff.
Nike’s Q4 earnings of $0.66 per share came in -1% below EPS expectations but the company was able to beat top-line estimates by 2% with sales at $12.82 billion.
Year over year, Q4 earnings dropped -26% with Nike attributing its overall gross margin decrease to higher product input costs and elevated freight and logistics costs. Sales did rise 5% from the prior-year quarter.
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Overall, Nike’s total sales were up 10% in fiscal 2023 to $51.22 billion but annual earnings declined -14% at $3.23 per share compared to EPS of $3.75 in FY22.
Still, CEO John Donahoe was high on the company’s FY23 stating it was a milestone year for Nike as their unique advantages continue to drive competitive separation.
Earnings Outlook
When compared to its main competitor Adidas (ADDYY), Nike’s outlook does project the competitive separation CEO John Donahoe alluded to in the company’s Q4 report.
Based on Zacks estimates, Nike’s current fiscal 2024 earnings are forecasted to rebound and jump 20% at $3.87 per share. More impressive, FY25 earnings are projected to climb another 20% at $4.64 a share.
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This easily trumps Adidas’ EPS growth as the company continues to deal with inventory headwinds surrounding the previous fallout with its partner and collaborator Kanye West.
To that point, Adidas earnings are now projected at an adjusted loss of -$1.49 per share in FY23 compared to EPS of $0.66 in 2022. However, Adidas’ fiscal 2024 earnings are also expected to rebound and soar to $2.10 per share although this is less daunting than Nike’s bottom line.
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Bottom Line
Like its rival Adidas, Nike stock currently lands a Zacks Rank #3 (Hold) at the moment. There could still be better buying opportunities ahead but holding Nike stock could be rewarding as the company adjusts to higher product input costs and logistic headwinds subside.
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