Fly Intel: What to watch in Nike's earnings report

Nike (NKE) is scheduled to report results of its second fiscal quarter after the market close on December 18, with a conference call scheduled for 5:00 pm ET. What to watch for:

1. GUIDANCE: While the company didn't provide specific guidance for fiscal 2021 in September, it forecast flat revenue in the first half of the year vs. the prior year, with total FY21 revenue up high single digits to low double digits. The company forecast sequential improvement in the second half of the year, saying it is recovering faster from the pandemic with brand momentum and its focus on execution. On its last earnings conference call on June 25, Nike guided first-half revenue "below prior year's levels" and FY21 revenue "flat to up" from FY20.

BTIG analyst Camilo Lyon believes that Nike should post a "solid" quarter with improving inventory trends and the strength in its digital demand, which he sees as "central" to the company's North America recovery. Morgan Stanley analyst Kimberly Greenberger sees the potential for an "upside surprise" in the upcoming quarter and the potential for positive EPS revisions given management's "seemingly conservative" full-year guidance.

2. LIKELY NO DEVELOPMENTS ON FRIDAY: BTIG analyst Camilo Lyon noted that in spite of the "eyebrow-raising" reporting day, he does not expect any "conspiracy inducing" developments like a purchase of Peloton (PTON) to materialize.

3. MORE OPTIMISTIC THAN CONSENSUS: Stifel analyst Jim Duffy said in a preview of Nike's upcoming fiscal Q2 report due on December 18 that he is "more optimistic than consensus," though he added that upside to consensus estimates may be more weighted to fiscal Q3, fiscal Q4 and further out. The analyst, who sees it as possible the company's FY21 revenue guidance will be "slightly more optimistic" than its prior outlook, said his higher-than-consensus EPS view for FY21, FY22, and FY23 at Nike reflects both revenue strength and higher gross margin expectations.

4. MAKING THE RIGHT INVESTMENTS: KeyBanc analyst Matthew DeGulis initiated coverage of Nike with an Overweight rating and $174 price target on December 11. The analyst believes Nike is making the right investments, particularly in e-commerce, international, and product and thinks the consumer spending environment remains robust in the near-term. DeGulis says Nike is near all-time highs, but believes the company's scale and investments in 2x speed will ensure more full-priced sales and its digital shift will enable long-term revenue and margin growth.

5. SHIPPING RESTRICTIONS: UPS (UPS) Nike and other large retailers with shipping restrictions amid the pandemic-fueled online shopping season, The Wall Street Journal's Paul Ziobro reported earlier this month. According to the an internal message reviewed by The Wall Street Journal and confirmed by UPS workers in different regions, UPS notified drivers to stop picking up packages at six retailers, including Macy's (M). A UPS spokesman says the company will pick up packages from customers whose demand exceeds allocated space once more capacity becomes available.