Nike Inc (NYSE: NKE) is losing in extended hours on Thursday after coming in shy of Street estimates for its fourth financial quarter.
Shares of the footwear giant are still down close to 15% versus the start of 2024.
Notable figures in Nike Q4 earnings release
- Earned $1.5 billion versus the year-ago $1.03 billion
- Per-share earnings also improved from 66 cents to 99 cents
- Adjusted EPS printed at $1.01 as per the earnings report
- Revenue inched down 2.0% year-over-year to $12.6 billion
- Consensus was 84 cents a share on $12.86 billion in revenue
Nike reported a 110 basis points increase in gross margin to 44.7% for the fourth quarter. John Donahoe – its chief executive said in a press release on Thursday:
We are taking our near-term challenges head-on, while making continued progress in the areas that matter most to NIKE’s future – serving the athlete through performance innovation, moving at the pace of the consumer and growing the complete marketplace.
$NKE shareholder returns and balance sheet
In May, Nike announced a cash dividend of 37 cents per share. It spent a total of $1.0 billion on buying back stock in the fourth quarter. According to Matthew Friend – the chief financial officer of $NKE:
We are taking actions to reposition NIKE to be more competitive, and to drive sustainable, profitable long-term growth.
Nike ended its Q4 with $11.6 billion of cash including cash equivalents and short-term investments – up some $900 million versus a year ago. Inventories at $7.5 billion were down 11% compared to same quarter of 2023.
Note that Nike stock traded at a high of $177 during the COVID pandemic.
Is Nike stock worth owning on the pullback?
Nike saw its wholesale revenue pop 5.0% to $7.1 billion but Nike Direct revenue slid 8.0% to $5.1 billion in the fourth quarter.
Still, analysts at Oppenheimer are convinced that this will be the last bad report from the athletic apparel behemoth. Their outperform rating on Nike stock is coupled with a $120 price target that translates to more than a 30% upside from here.
The investment firm sees NKE as a top megacap stock because a “turnaround is underway”. Near-term financials of Nike Inc, it told clients in a research note ahead of the earnings release, are “largely de-risked” now that the stock has lost about 15% year-to-date.
All in all, the bad news is priced into the Nike stock and its management’s refocus on brand building and product innovation will translate to price appreciation moving forward, they concluded. On the flip side, however, famed investor and Mad Money host Jim Cramer recently said it was too soon to buy Nike stock.
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