Michael Fowlkes' Analyst Insights
Options and ETF Analyst Writer
Nike reports fiscal Q3 numbers March 21
3/18/2017 11:54 AM
Athletic footwear and accessories leader Nike, Inc. (NKE) is slated to post its fiscal third-quarter results on March 21. The company will post its quarterly numbers after the market close, with the consensus calling for earnings of $0.52 per share on revenue of $8.45 billion. During the same period last year, the company earned $0.55 on sales of $8.03 billion. NKE shares have appreciated 10.8% on the year.
NKE was recently trading at $57.60, down $7.84 from its 12-month high and $8.59 above its 12-month low. Technical indicators for NKE are bullish with a weak upward trend. The stock has recent support above $56.05 and recent resistance below $58.25. Of the 27 analysts who cover the stock, 14 rate it a “strong buy”, 12 rate it a “hold”, and one rates it a “sell”. The stock receives S&P Capital IQâ€™s 4 STARS “Buy” ranking.
After a disappointing 2016, NKE stock hit a bottom in November, and has been trending steadily higher since. Nike has a good earnings track record, topping analyst estimates for 18 straight quarters. Revenue has been less consistent, but after three quarters of weaker than expected sales numbers, Nike has topped sales estimates two straight quarters, and this played a major role in the stock's recent gains. The street expects another decent quarter for Nikes, with the whisper number calling for earnings of $0.55, which is $0.03 higher than the general consensus for the quarter. Sales and earnings have been on the rise, and analysts expect full year earnings growth of 8.3%, and profits rising another 12.8% in 2017. Following last year's losses, the stock's valuation looks rather attractive, with a P/E of just 25.4. Give the valuation, and the stock's bullish growth estimates, there is plenty of reason to believe the stock will continue building on recent gains. Analysts have an average price target of $59.73 on the stock.
Stock Only Trade
If you're looking to establish a long stock position in NKE, consider buying the stock under $57.50. Sell if it falls below $51.75 or take profits if it gets to $66.25.
If you want to set up a bullish hedged trade on NKE, consider a June 45/50 bull-put credit spread for a 30-cent credit. That's a potential 6.4% return (25.6% annualized*) and the stock would have to fall 12.7% to cause a problem.
If you want to take a bearish stance on the stock at this time, consider a June 65/70 bear-call credit spread for a 25-cent credit. That's a potential 5.3% return (21.1% annualized*) and the stock would have to rise 13.3% to cause a problem.
Covered Call Trade
If you like the stock, but wish to lower your cost basis on a new position, you may want to consider a July $57.50 covered call. Buy NKE shares (typically 100 shares, scale as appropriate), while selling the July $57.50 call for a debit of $54.60 per share. The trade has a target assigned return of 5.3%, and a target annualized return of 15.5% (for comparison purposes only).