NIKE Faces Challenges: Analysts Downgrade Stock After Weak Earnings
NIKE NKE, a leader in athletic footwear and apparel, operates in over 160 countries around the world. Recently, analysts have lowered their earnings forecasts for the company following disappointing quarterly results, resulting in a Zacks Rank of #5 (Strong Sell).
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Let’s delve into the factors impacting NIKE’s performance.
Challenges for NIKE
NIKE’s latest quarterly earnings report generated concern among investors, as both earnings per share (EPS) and sales showed significant declines. Specifically, EPS dropped by 25% compared to the previous year, while sales fell by 8%.
The stagnation in sales growth is striking, suggesting minimal progress over recent years. A quarterly sales chart highlights this trend.
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“We’re taking immediate action to reposition our business to restore long-term shareholder value. Our team is prepared, and I’m confident you will witness more moments of NIKE being NIKE again,” stated CEO Elliott Hill.
Currently, NIKE’s valuation appears high, with a forward 12-month earnings multiple of 32.7X, exceeding the five-year median of 30.4X. Additionally, the PEG ratio stands at 2.2X, slightly above its five-year median, reflecting elevated expectations for future growth.
Bottom Line
Analysts’ downward revisions of earnings estimates from lackluster quarterly results present a challenging outlook for NIKE’s stock in the short term. With a Zacks Rank of #5 (Strong Sell), experts have expressed a bearish perspective on the company’s earnings potential.
For investors interested in better-performing stocks, it could be wise to consider opportunities in stocks rated #1 (Strong Buy) or #2 (Buy) by Zacks. These stocks typically offer stronger earnings prospects and could lead to greater returns.
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