Nike (NKE) Q2 2020 earnings preview: Focus to be on direct-to-consumer business

NIKE Inc. (NYSE: NKE) is scheduled to report second quarter 2020 earnings results on Thursday, December 19, after the market closes. Analysts have predicted earnings of $0.58 per share on revenue of $10.08 billion.

Nike started fiscal year 2020 on a strong note with growth in revenue and profits. The company has been investing significantly in its direct-to-consumer (DTC) business which is seeing good growth. The momentum in the DTC business will be a key point to focus on when looking at the second quarter performance. As part of its efforts to improve direct sales to customers, Nike ended its partnership with Amazon (NYSE: AMZN) last month.

Nike’s strategy that focuses on product innovation and building digital capabilities appears to be paying off. Last quarter, the company saw revenue growth across all its segments, with the exception of Global Brand Divisions, which saw a double-digit decline. Revenues increased across all geographies with the highest growth of 22% in Greater China. Despite the momentum, higher expenses might put pressure on margins in the second quarter.

Also read: Nike Q1 2020 Earnings Conference Call Transcript

In the first quarter of 2020, Nike topped revenue and earnings estimates. Revenue increased 7% to $10.7 billion while EPS jumped 28% to $0.86. Revenues increased 10% for the NIKE brandand 8% for Converse on a currency-neutral basis.

Shares of Nike have gained 33% so far this year and 6% in the past one month. The stock was up 1.3% in morning trade on Monday. The majority of analysts have rated the stock Buy and it has an average price target of $104.94, representing a 5% upside from the current level.

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