Financial Insights That Matter
Nike (NKE) has been one of the most searched-for stocks on Zacks.com lately. So, you might want to look at some of the facts that could shape the stock’s performance in the near term.
Shares of this athletic apparel maker have returned -7.6% over the past month versus the Zacks S&P 500 composite’s -3.3% change. The Zacks Shoes and Retail Apparel industry, to which Nike belongs, has lost 6.3% over this period. Now the key question is: Where could the stock be headed in the near term?
Although media reports or rumors about a significant change in a company’s business prospects usually cause its stock to trend and lead to an immediate price change, there are always certain fundamental factors that ultimately drive the buy-and-hold decision.
Here at Zacks, we prioritize appraising the change in the projection of a company’s future earnings over anything else. That’s because we believe the present value of its future stream of earnings is what determines the fair value for its stock.
Our analysis is essentially based on how sell-side analysts covering the stock are revising their earnings estimates to take the latest business trends into account. When earnings estimates for a company go up, the fair value for its stock goes up as well. And when a stock’s fair value is higher than its current market price, investors tend to buy the stock, resulting in its price moving upward. Because of this, empirical studies indicate a strong correlation between trends in earnings estimate revisions and short-term stock price movements.
For the current quarter, Nike is expected to post earnings of $0.30 per share, indicating a change of -69.4% from the year-ago quarter. The Zacks Consensus Estimate has changed -52.2% over the last 30 days.
The consensus earnings estimate of $2.10 for the current fiscal year indicates a year-over-year change of -46.8%. This estimate has changed -22.3% over the last 30 days.
For the next fiscal year, the consensus earnings estimate of $2.36 indicates a change of +12.3% from what Nike is expected to report a year ago. Over the past month, the estimate has changed -22.4%.
Having a strong externally audited track record, our proprietary stock rating tool, the Zacks Rank, offers a more conclusive picture of a stock’s price direction in the near term, since it effectively harnesses the power of earnings estimate revisions. Due to the size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, Nike is rated Zacks Rank #5 (Strong Sell).
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