Nike (NKE) is expected to report results on its fiscal second quarter on Thursday, December 21, with a conference call scheduled for 5:00 pm EDT. What to watch for:

GUIDANCE: In September, Nike forecast Q2 revenue to be up slightly, with gross margin expansion of 100 basis points. The company backed its fiscal 2024 revenue guidance for up mid-single digits, with gross margin expansion of 130-140 basis points. Analyst currently expect Nike to report Q2 revenue of $13.43B and FY24 revenue of $53.14B. Shares of Nike had spiked about 10% in the immediate aftermath of its Q1 results and also gained about 35% since that September 28th reporting date. Year-to-date however, Nike shares are up just 3.7%, underperforming the broader indices.

Telsey Advisory said Nike faces tough year-over-year comparisons as last year's Q2 benefited from improved inventory availability. Gross margins, however, should be a "bright spot" for the company as it benefits from lower supply chain costs and annualizes the higher promotions it began last year, the firm added. BofA expects Nike to hit or beat consensus EPS, but models a sales miss compared to consensus in both Q2 and Q3. The firm thinks improving data points on China, a better narrative on the promotional environment and more details about product innovation are needed to spark multiple expansion, the analyst added. Baird expects Nike to beat fiscal Q2 earnings estimates and maintain or raise 2024 guidance, although the firm's confidence in company's current margin drivers is higher than for revenue.

ACCELERATING INTEREST IN SNEAKERS: According to Jefferies' digital data panel, interest in sneakers has accelerated into the Holiday season, and the firm is incrementally more positive on demand for athletic footwear/apparel, the analyst tells investors in a research note. Jefferies views Nike as a best-in-class retailer, but believes it is not immune to the category macro headwinds, which could hinder sales and margin expansion.

RECOVERY, EARNINGS UPSIDE: Barclays said Nike is headed for margin recovery and earnings upside in 2024, citing the company's positive sales-to-inventory inflection in Q1, upcoming cost input inflection in Q3, wholesale "bottom" in Q2, and DTC re-acceleration.

Citi, meanwhile, upgraded Nike to Buy from Neutral with a price target of $135, up from $100, and said that while the company's sales challenges remain, the firm is more optimistic about Nike's ability to "protect" earnings in fiscal 2024 and 2025 despite a "choppy" macro environment. The firm sees a gross margin recovery starting in Q2 of 2024 through 2025 from leaner inventory, lower promotions and direct-to-consumer benefits.

GOLDMAN SEES INFLECTION IN EARNINGS, STRONGER REVENUE:  On December 4, Goldman Sachs assumed Nike shares at Buy, with a higher price target of $139, up from $136, on expectation of an inflection in the company's earnings growth due to benefits from "transitory" cost recapture and strengthening marketplace inventory backdrop. Goldman had also forecast Nike being able to generate stronger revenue growth as it cycled through tough compares and reaccelerated its innovation and marketing engine. The firm's more constructive outlook was also rooted in some of the company's recent leadership and organizational changes as well as its more comprehensive plans for product launches heading into the 2024 Olympics.

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