NIKE Pre-Q2 Earnings: Buy Now or Wait Out Near-Term Volatility?

Core Viewpoint - NIKE Inc. is expected to report a decline in both revenue and earnings for the second quarter of fiscal 2026, with revenues projected at $12.2 billion, a 1.7% decrease year-over-year, and earnings per share estimated at 37 cents, reflecting a 52.6% decline from the previous year [1][2][10] Financial Performance - The Zacks Consensus Estimate indicates a revenue drop to $12.2 billion and earnings of 37 cents per share for the fiscal second quarter, marking a significant decline from the prior year [2][10] - In the last reported quarter, NIKE achieved an earnings surprise of 81.5%, exceeding consensus estimates by an average of 53.7% over the last four quarters [3] Earnings Expectations - NIKE has an Earnings ESP of -3.79% and a Zacks Rank of 3, suggesting that the likelihood of an earnings beat is low for this quarter [4] - The company is facing challenges in the Sportswear segment due to the deliberate phase-out of aging franchises, which is expected to create revenue softness [11] Regional Performance - North America remains NIKE's strongest region, with projected revenues of $5.2 billion for the second quarter, indicating a modest 0.5% year-over-year growth [7] - In EMEA, revenues are expected to rise by 1.7% as inventory levels normalize and the focus shifts to profitability [8] - Greater China is projected to see a significant revenue decline of 12.7% year-over-year, with revenues estimated at $1.5 billion, reflecting ongoing structural weaknesses [12] Margin and Cost Management - NIKE anticipates a gross margin decline of 300-375 basis points, influenced by higher tariffs and increased promotional activity [13] - SG&A expenses are expected to rise in the high-single digits due to increased demand creation investments [14] Stock Performance and Valuation - NIKE shares have declined by 6.2% over the past three months, underperforming the industry and the S&P 500 [15] - The current stock price of $67.78 reflects a 29.6% increase from its 52-week low but is 17.8% below its 52-week high, with a forward P/E ratio of 31.47, higher than industry and S&P averages [19] Strategic Initiatives - NIKE's "Win Now" strategy aims to restore brand energy and position the company for sustainable growth, focusing on operational resets and improved wholesale partnerships [5][21] - The company is adapting to market dynamics through innovation-led product launches and enhanced consumer engagement [21][23] Challenges Ahead - The company faces near-term challenges, including weak demand in lifestyle categories, elevated SG&A costs, and the impact of new U.S. tariffs [24] - Management's cautious outlook highlights the difficulty in balancing short-term financial pressures with long-term strategic goals [22][24]