down 13% this year. Will Nike stock rebound after fourth-quarter results?

[Note: Nike fiscal year ends in May]

Nike’s stock Nike Inc. (NYSE: NKE), a company that designs, develops and markets footwear, apparel, equipment and accessories, is expected to report fourth-quarter fiscal 2024 earnings results on Thursday, June 27. We expect shares of Nike to likely trade higher. Revenue and earnings have marginally beat market estimates. At a current price of around $95 per share, Nike stock has fallen 13% year to date. By comparison, NKE’s Lululemon (NASDAQ: LULU) shares have fallen 40% year to date. Nike has struggled with supply chain constraints and a slower-than-expected recovery in China. Nike’s revenue growth is not as strong as expected, but the company’s profitability is strong and it has a huge competitive advantage thanks to its brand and the demand it has been able to build. While the company’s stock could likely face pressure in the near term, the company’s long-term prospects look strong. Looking ahead, Nike management expects revenue growth of just 1% for the full year 2024. Over the next three years, Nike plans to cut expenses by $2 billion, which could help its operating profit margin reach the levels we’ve seen during the pandemic, at just over 15% (up from ~13% today).

NKE stock has suffered a sharp 30% decline from levels of $140 in early January 2021 to around $95 now, versus a rise of around 45% for the S&P 500 over this roughly 3-year period. Notably, NKE stock has underperformed the broader market over the past 3 years. Returns for the stock were 18% in 2021, -30% in 2022 and -7% in 2023. By comparison, returns for the S&P 500 were 27% in 2021, -19% in 2022 and 24% in 2023, which indicates that NKE underperformed the S&P in 2021, 2022 and 2023. In fact, It consistently beats the S&P 500 — for better or worse — the past few years have been tough for individual stocks; for consumer staples heavyweights including AMZN, TSLA and HD, and even for mega-cap stars GOOG, MSFT and AAPL.

In contrast, the Trefis High Quality Portfolio, with a collection of 30 stocks, outperformed the S&P 500 every year Over the same period. Why is that? As a group, HQ Portfolio shares delivered better returns with less risk compared to the benchmark index; less of a rollercoaster ride, as evidenced by HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and high interest rates, NKE could face a similar situation as it did in 2021, 2022 and 2023, and perform worse than the S&P in the next 12 months – or will there be a recovery?

Our forecast indicates that Nike’s valuation is $101 per share, which is almost 7% higher than the current market price. View our interactive dashboard analysis at Nike’s earnings outlook: What can you expect in the fourth fiscal quarter? for more details.

(1) Revenue and earnings per share are expected to be slightly above consensus estimates

Trefis estimates Nike’s fourth-quarter 2024 revenue to be about $12.2 billion and earnings per share are expected to reach 81 cents according to Trefis’ analysis, both of which marginally exceed market expectations. Through the first nine months of fiscal 2024, Nike’s revenue grew just 1% year-over-year (YoY) to nearly $39 billion, but earnings per share rose a solid 7% YoY to $2.76. Inventories for Nike were $7.7 billion, down 13% from the prior year in the third quarter. A steady stream of innovative footwear releases and a decline in inventory levels have driven higher profit margins so far in fiscal 2024. Nike’s gross margin came in at 44.5%, up 100 basis points year-over-year in the first three quarters of 2024.

(2) Estimated stock price higher than current market price

If we go by our Nike’s ratingWith an earnings per share (EPS) estimate of around $3.58 and a price/earnings ratio of 28.2x in FY24, this equates to a price of $101, which is almost 7% higher than the current market price.

It’s useful to see how its competitors compare. NKE Peers shows how Nike’s stock compares to its competitors based on key metrics. You can find other useful comparisons for companies in different industries at Peer Comparisons.

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