Nike Earnings Preview — Tariff Fears Front and Center
By:Mike Butler
Nike (NKE) is set to report quarterly earnings Thursday after the market closes, and the future is uncertain for the global footwear brand. The company’s stock is trading around $61 per share, which is a level we haven't seen since COVID-19 took over the headlines and caused a global pandemic. Now, Nike has other tariff-centric troubles to conquer — it’s expected prices will rise to offset import duties Nike faces, given so much of its production comes from Asia.
The stock is down 20% on the year, and analysts are expecting earnings per share (EPS) of $0.12 on $10.71 billion in revenue for the quarter. Both figures are down significantly from this time a year ago.
In the last earnings call, Nike CEO Elliot Hill offered comments: “The progress we made against the 'Win Now' strategic priorities we committed to 90 days ago reinforces my confidence that we are on the right path ... What's encouraging is Nike stands to made an impact this quarter leading with sport —through athlete storytelling, performance products and big sport moments."
With this said, leading performance indicators were down for the quarter and Nike executives still have work to do before the ship is fully turned around.
Looking at the implied volatility of the options market, we can see a +/- $4.38 expected stock price range for this week. This is about 6% of the notional value of the stock price, which is low for a company engulfed in uncertainty. Looking to September of this year, we can see a +/- $7.88 expected stock price range.
This means that although implied volatility is low for earnings, it's still a huge chunk of the expected range for the next few months. Traders and investors will be paying attention to the announcement on Thursday, hoping for a better idea of what's to come for Nike.
If you're bullish on Nike for earnings, you're looking for the premium athletic company to beat EPS and revenue expectations. In this specific case, it may be more valuable to hear how they may offset price hikes by shifting production away from high tariff countries. If executives can offer a strong solution with a plan, we could see the stock price rally from the lows.
If you're bearish on Nike stock for earnings, you're banking on misses for EPS and revenue estimates, and you might expect a continuation of the foggy outlook for Nike for the rest of the year. At some point, investors and traders alike may shift out of the stock and look for greener pastures considering the general market is just off of 2025 highs.
Tune in to Options Trading Concepts Live at 11 a.m. CDT on Thursday for an in-depth look at earnings strategies with options before the announcement takes place.
Mike Butler, tastylive director of market intelligence, has been in the markets and trading for a decade. He appears on Options Trading Concepts Live, airing Monday-Friday. @tradermikeyb
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