Nike Stock (NKE) – Trade Ahead of Earnings Update – Sep 27 2016

After the markets closed on Tuesday Sep 27, Nike released their earnings. The stock shot to over $58 after hours and then fell back to close down 2.62% at $53.89.

After Hours Flip-Flop

This rather schizophrenic move after hours was a result of the earnings which literally crushed analysts estimates which sent the stock higher initially only to have the stock fall back as investors saw signs within the quarterly report that competitors are having an impact on Nike’s overall market share and earnings potential.

Nike’s Plan – $50 Billion In Revenue

Nike’s plan is to reach $50 billion  year in revenue by 2020, just 4 years away.  With present revenue at $32.4 billion it may be more difficult than originally planned for Nike to achieve that goal.

First Quarter Revenue Numbers

First quarter revenue reported after hours came in at $9.1 billion versus $8.4 billion for the same period last year and estimates of $8.7 billion for the first quarter. So with revenue up by $400 million over estimates and $#700 million over the same period from last year, you would think investors would be ecstatic. Earnings came in at 73 cents a share up 21.6% from the same quarter last year when Nike earnings 60 cents.

Here’s What Sunk Nike Stock After Hours

However it was some of the other financial information that sunk the stock including a drop in quarterly gross margins of 200 basis points. Also future orders were lower than estimated or expected for the third straight quarter and both Under Armour and Adidas continue to make inroads into retailers.  Adidas classic footwear sales quadrupled in August alone while Nike’s similar shoes saw sales increases of 33 percent. Meanwhile Under Armour is continuing to expand its athletic apparel and outlets including signing a new deal with Kohl’s Corp (KSS) to sell its products throughout the chain starting in 2017.

Change In Forecasting Future Orders Is Worrisome

Adding to investor concerns was Nike’s decision that it would change its forecast for future orders from announcing it in the earnings release to announcing it at the same time as the earnings call. This might seem insignificant but for a lot of investors it is a decision that breaks years of tradition for Nike and hints that the company is concerned about their stock price and future growth of competitors. This change on its own hurt the stock after hours.

Nike Outlook (NKE) For Wednesday Sep 28 2016

With earnings now released here is what I will be doing on Wednesday Sep 28, to handle the trade I setup on Monday ahead of earnings to try to maximize my profit.

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Disclaimer: There are risks involved in all investment strategies and investors can and do lose capital. Trade at your own risk. Stocks, options and investing are risky and can result in considerable losses. None of the strategies, stocks or information discussed and presented are financial or trading advice or recommendations. Everything presented and discussed are the author’s own trade ideas and opinions which the author may or may not enter into. The author assumes no liability for topics, ideas, errors, omissions, content and external links and trades done or not done. The author may or may not enter the trades mentioned. Some positions in mentioned stocks may already be held or are being adjusted.

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