stocks

Nike Stock: China Worries Hang Over NKE Earnings

Our preview of the upcoming week's earnings reports includes Nike (NKE), Micron Technology (MU) and CarMax (KMX).

Nike (NKE, $161.78) headlines a thin earnings calendar this week. BofA Global Research analysts Lorraine Hutchinson and Christopher Nardone aren't expecting any surprises when the athletic apparel maker reports its fiscal second-quarter results after Monday's close. 

Indeed, Nike may have caught the Street off-guard in its last two reports, updating its five-year plan in June and then lowering its fiscal 2022 sales guidance in September – the latter due to supply-chain issues and COVID-related factory closures in Vietnam and Indonesia. But management has already warned of a few challenging quarters ahead, the analysts say.

As for the details of the report, Hutchinson and Nardone will be watching for updates on China, where data points remain volatile following supply-chain disruptions and last spring's boycott of the brand by consumers on the mainland. 

Specifically, data from Tmall – a China-based e-commerce site run by Alibaba (BABA) – shows Nike revenues were down 31% year-over-year in the company's fiscal second quarter, while monthly sales at Pou Sheng, a major Chinese distributor for NKE, were off 30% compared to the year prior. The pair has a Neutral rating on the stock – which is the equivalent of a Hold – saying "the risk/reward remains balanced until we have more visibility on the rebound in China."

This outlook is shared by UBS Global Research analyst Jay Sole. "Sentiment on Nike has improved over the past two months as the Vietnam factory shutdown issue has faded," Sole writes in a note. However, he's keeping his expectations in check amid "concern around how Nike is performing in China."  

Still, Sole has a Buy rating on the Dow Jones stock. "We continue to believe Nike will be a long-term global share taker (including within China) and outperform over the near term," he says.

Amid these overhangs, analysts, on average, are expecting Nike to report a 19.2%  year-over-year (YoY) drop in earnings to 63 cents per share. Revenues are expected to edge up to $11.26 billion from last year's $11.24 billion.

Micron Stock Rebound Stalls Ahead of Earnings

After bottoming near $66 in mid-October, Micron Technology (MU, $82.13) rebounded sharply, gaining more than 38% to hit its late-November highs around $87. More recently, though, this rally has stalled, with MU stock last seen trading closer to $82.

Can earnings give the semiconductor stock the jolt it needs to finish the year strong?

"We see results and guidance biased higher amid early signs of improvement in calendar fourth-quarter DRAM contract pricing that we think sustains into the February quarter and into summer 2022," says UBS Global Research analyst Timothy Arcuri (Buy). As such, he raised his price target on MU to $99 from $90 ahead of the company's fiscal first-quarter earnings report, due out after Monday's close.

Arcuri isn't alone in his upbeat outlook toward Micron. Of the 35 analysts covering the stock that are tracked by S&P Global Market Intelligence, 20 call it a Strong Buy and seven say Buy. This compares to six that have it at Hold, one that rates it a Sell and one that has it at Strong Sell.

As for MU's upcoming earnings report, consensus estimates are for earnings of $2.11 per share (+170.5% YoY) and revenues of $7.67 billion, a 32.9% improvement over the year-ago period.

Analyst: Expect CarMax Earnings to Beat Estimates

Used car dealer CarMax (KMX, $tk) has thrived in 2021 as a global chip shortage created a dearth of new vehicles – and ramped up sales (and prices) of used ones. Year-to-date, the stock is up 50%, though it's currently off about 10% from its mid-November record high around $156.

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So, what should we expect from KMX's fiscal third-quarter earnings report, due out ahead of the Dec. 22 open? 

"We believe CarMax is poised to easily exceed third-quarter consensus top-line expectations given very healthy sales momentum, improved inventory levels, improved conversion on better staffing levels and ongoing robust used car pricing," says William Blair analyst Sharon Zackfia. She has an Outperform rating on the stock, which is the equivalent of a Buy.

As for those consensus estimates, analysts, on average, are expecting fiscal third-quarter earnings of $1.46 per share – up 2.8% from the year prior – and revenues of $7.34 billion (+41.7% YoY). For the sake of comparison, Zackfia is anticipating slightly higher earnings of $1.48 per share on $8.08 billion in sales.

Karee Venema was long NKE as of this writing.

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