NIKE (NKE) is the global leader in athletic footwear, apparel, equipment, and sports-related accessories, with operations in over 160 countries. Analysts downwardly revised their earnings expectations across the board following its latest quarterly release, landing the stock into an unfavorable Zacks Rank #5 (Strong Sell).

Image Source: Zacks Investment Research

Let’s take a closer look at what’s been affecting the company.

NIKE Faces Hurdles

NIKE shares faced pressure following the release of its latest quarterly results, with commentary not all that soothing either. Concerning headline figures in the release, EPS fell 25% year-over-year alongside an 8% decline in sales.

The performance on headline numbers jumps out, with the company’s top line primarily remaining stagnant and showing little growth over recent years. Below is a chart illustrating the company’s sales on a quarterly basis.

Image Source: Zacks Investment Research

"We're taking immediate action to reposition our business, so we can get back to driving long-term shareholder value. Our team is ready to go, and I'm confident you will see more moments of NIKE being NIKE again," said CEO Elliott Hill.

The valuation picture here remains rich, with the current 32.7X forward 12-month earnings multiple sitting above the 30.4X five-year median. The current PEG ratio works out to 2.2X, again a hair above the five-year median and quite elevated given the forecasted growth.

Bottom Line

Analysts' negative earnings estimate revisions, resulting from weak quarterly results, paint a challenging picture for the company’s shares in the near term.

NIKE is a Zacks Rank #5 (Strong Sell), indicating that analysts have taken a bearish stance on the company’s earnings outlook.

For those seeking strong stocks, a great idea would be to focus on stocks carrying a Zacks Rank #1 (Strong Buy) or a Zacks Rank #2 (Buy). These stocks sport a notably stronger earnings outlook and the potential to deliver explosive gains in the near term.

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