Nike (NKE) Earnings: Can the Dow Stock Shrug Off Supply Chain Woes?

It's the tail end of earnings season, but there are still some heavy-hitters on tap. Among them is athletic apparel maker Nike (NKE, $156.42), which is scheduled to tell all in the earnings confessional after the Sept. 23 close.

Investors would certainly welcome a positive reaction to NKE earnings, given the struggles the stock has seen over the past month. Since topping out at a record high near $174 in early August, Nike shares have shed more than 10%.

While some of the more recent sell-off could be due to broad-market headwinds – the Dow and S&P 500 are both down about 0.2% so far in September – Wall Street appears to be a bit concerned over COVID-related global supply chain issues, particularly after Nike was forced to shutter factories in Vietnam in July because of the pandemic.

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These factories accounted for roughly 51% of NKE's total production capacity in Asia ahead of the shutdown. "The risk of significant cancellations beginning this holiday and running through at least next spring has risen materially for NKE as it is now facing at least two months of virtually no unit production at its Vietnamese factories," BTIG analyst Camilo Lyon wrote in a note. He recently downgraded the stock to Neutral (Hold) from Buy.

These months-long Vietnamese production disruptions also prompted UBS analyst Jay Sole to lower his fiscal 2022 earnings per share (EPS) estimate by 3%. Nevertheless, Sole – who has a Buy rating on the Dow stock – believes supply chain fears are likely already priced in.

Stifel analysts (Buy) also cut sales and earnings estimates, for the second and third quarters of fiscal 2022, but they see the "supply-oriented shocks to the business as one-time in nature and representing opportunity for positive reversal in future periods."

Additionally, any pullbacks in NKE should be viewed as a buying opportunity, "particularly if the stock sees a negative reaction to tempered fiscal 2022 guidance," they say. "There is no change to our constructive long-term outlook."

As far as Nike's upcoming fiscal first-quarter report: The pros, on average, are looking for a 17.9% year-over-year (YoY) rise in earnings to $1.12 per share. Revenue, meanwhile, is expected to arrive at $12.5 billion, a 17.9% improvement from the year prior.

FedEx Stock Stalls Ahead of Earnings

FedEx (FDX, $255.22) will report its fiscal first-quarter earnings after the Sept. 21 close.

The shares of the freight giant have been trending lower since May, and are now in negative territory on a year-to-date basis. But while "valuation has become more interesting … greater conviction in a sustained improvement in Express operating margin and return on invested capital (ROIC) is still needed for a more constructive view," BMO Capital analyst Fadi Chamoun says.

He adds that growth in FedEx's ground segment has slowed and "there appears to be limited opportunity for further improvement in the operating margin as the segment faces inflationary cost pressures, further capital investment needs and likely greater competitive intensity."

While Chamoun maintains a Market Perform (Neutral) rating on FDX, most pros are bullish. According to S&P Global Market Intelligence, 18 analysts call FedEx a Strong Buy, while five have a Buy rating. The other seven following the stock say it's a Hold, with not one Sell or Strong Sell rating out there. Plus, the average target price of $341.25 represents implied upside of roughly 34% over the next 12 months or so.

In terms of earnings, analysts, on average, see EPS of $5.00 in FedEx's fiscal first quarter, which is 2.7% higher than the year-ago period, and revenue of $21.9 billion (+13.5% YoY).

Darden Restaurants Expected to Report Major Growth

Darden Restaurants (DRI, $149.43) has had a choppy year, but the broader path has been higher. To wit, the shares are up more than 25% so far in 2021, and are trading about 3 percentage points below their late-August all-time peak of $153.

The stock could take out this technical milestone after it reports fiscal first-quarter earnings ahead of the Sept. 23 open, should history repeat itself. Following the release of its fiscal fourth-quarter results in June – which handily beat expectations and showed the Olive Garden parent's same-store sales had nearly returned to pre-pandemic levels – the shares jumped 3.2%.

Wall Street pros are certainly upbeat ahead of the company's results. Oppenheimer analysts Brian Bittner and Michael Tamas, for instance, are anticipating year-over-year same-store sales growth of 45.1% for DRI's fiscal first quarter, with 48.9% revenue growth expected for the three-month period.

Darden Restaurants "remains our favorite pick within full-service dining," they say. "Based on our analysis, we believe the model is uniquely positioned to at least achieve fiscal 2022 EPS forecasts despite industry-wide cost pressures. Plus, management is armed with unique sales levers to accelerate share gains if industry demand becomes choppier into year-end." They have an Outperform rating on DRI, which is the equivalent of a Buy.

Overall, the average analyst estimate is for Darden Restaurants to report fiscal Q1 EPS of $1.63 (+191% YoY). On the top line, estimates are for $2.2 billion, which is 43.8% more than what the company reported a year ago.