Nike's Next Earnings Report on Oct. 1 Could Send the Stock Plunging. Here's Why.
Key Points
A turnaround plan started two years ago has gone nowhere.
Nike is facing external factors that have made the turnaround more difficult than expected.
Still, sentiment remains poor, and many footwear and apparel companies continue to struggle under current economic conditions.
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It hasn't been an easy year for Nike (NYSE:NKE) shareholders, with the stock down nearly 43%. The turnaround plan has stalled amid difficult broader economic conditions in some of its larger markets.
However, Nike will have another chance to demonstrate its progress when it reports earnings results for its first quarter of fiscal year 2027 after the market closes on Oct. 1. Management will then host an earnings call with analysts to provider further details on the quarter.
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As of this writing, Wall Street consensus estimates call for Nike to report earnings of $0.44 per share on total revenue of $11.33 billion.
Here's why the upcoming earnings report could send the stock plunging.
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Poor sentiment
Nike pulled the longtime company veteran Elliott Hill out of retirement in late 2024 to lead a companywide turnaround effort after years of struggles.
Nike's stock has been killed over the past five years due to several factors, including intense competition, overreliance on promotional sales, and what many consider a lack of product innovation.
Hill came aboard promising to restore wholesale relationships and refocus the brand on product innovation and sports.
But two years later, Hill and Nike shareholders don't have much to show for it. In fairness, some of the company's struggles are outside of Nike's control.
For instance, President Donald Trump's new tariffs, as well as weak consumer demand in China, a key market for Nike, have not helped matters.
Total sales in Nike's fiscal year 2026 were flat year over year, while earnings fell 3%. The stock has been creamed and now trades around a 12-year low.
But that doesn't mean it's time to buy just yet. For one, the entire sector seems to be struggling due to broader economic conditions.
One of Nike's competitors, Lululemon, has also gotten hammered this year. In its most recent earnings report for the quarter ended Aug. 2, management guided for net revenue in 2026 to decline 5% to 7% annually.
Wall Street analysts have also been raising the alarm. Piper Sandler analyst Anna Andreeva recently lowered her price target from $45 per share to $38, while maintaining a neutral rating on the stock.
In a note, Andreeva wrote that demand for footwear in the U.S. has weakened, while markets in Europe, the Middle East, and Africa face macro challenges. China is also a potential concern.
Bank of America analyst Lorraine Hutchinson also raised concerns about the business, suggesting that product innovation has not yet had a material impact. Hutchinson cut her price target on Nike from $47 per share to $30 and issued an underperform rating on the stock.
The stock is not dead, but a turnaround can take longer than expected
Just because Nike is struggling right now doesn't mean there isn't a long-term investment case for the stock.
After all, it has been absolutely crushed, and sentiment is poor, so perhaps an upside earnings surprise could get the stock moving.
Some, like Jefferies analyst Randal Konik, think Nike will show progress in the upcoming earnings report and that the stock can double sooner than investors think.
However, considering what happened with Lululemon on its latest earnings report, negative sentiment in the market, and that we are two years into the turnaround effort already, I think investors should see evidence of progress before hitting the buy button.
Making a near-term call on an earnings event is very difficult, and even if Nike were to rally 10% following earnings, investors could still get in at a good price if they think the turnaround is taking form.
But anything short of a meaningful upside surprise won't impress the market and could trigger a sell-off, especially with investors already impatient.
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Bank of America is an advertising partner of Motley Fool Money. Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nike. The Motley Fool recommends Lululemon Athletica Inc. The Motley Fool has a disclosure policy.
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