Nike (NKE) Investors Scream "Just Do It" For a Q2 Sales Beat

Nike, Inc (NYSE: NKE) is trading marginally higher before the company reports their second quarter earnings after the market closes on Thursday, December 17, 2009. The shares are up 0.19% to $64.47 in afternoon trading.

Nike is expected to report Q2 EPS of $0.71 on revs of $4.4 billion. For Q110, Nike posted an EPS of $1.04 and revs of $4.9 billion. For Q209, Nike posted revs of $4.6 billion and an EPS of $0.80. In both instances, Nike beat on the bottom, but not the top.

Through the quarter, Nike shares are up $17.7% from the open on September 1, 2009 to close on November 30, 2009. From January 1, 2009, to November 30, 2009, Nike shares are up about 29%. For comparison, the Footwear sector is showing a 35% gain through the period, so Nike is lagging a little this year. One might assume that it would be a little more challenging for a $31 billion market cap company to keep outpacing an entire index, although Amazon.com (NASDAQ: AMZN) does it fairly well (almost 300% well). In addition, Nike is a consumer cyclical company, seeing more crests and troughs because it is less of a necessity than a non-cyclical company such as Coca-Cola (NYSE: KO).

Data from Bloomberg shows that 9 have a Buy rating on NKE, 11 have a Hold, and 1 says to Sell. The Street price consensus is $69.67. The high consensus price target is $77, and the low is $52.

Avondale initiated coverage on Nike in September. They gave the company a Market Perform rating, but did not specify a price target.

Goldman Sachs upgraded Nike in September from Neutral to Buy, with a price target of $75. The firm said that they see Nike having multiple expansion as focus shifted from risk to opportunity.

Hilliard Lyons downgraded Nike to Neutral from Long-Term Buy.

McAdams also downgraded the company in October, from Buy to Hold, and has a price target of $60 for Nike.

Capstone, in mid-October, initiated coverage on Apparel/Shoe companies. They started NKE at Hold.

GOLDMAN ESTIMATES:
Currently, Goldman Sachs has an estimated EPS of $0.81 for Q210 on Nike. They see a margin upside, particularly on gross margin. They see lower input costs and reduced discounting to more than offset any linger in currency fluctuations. Nike notes positive spring orders from China seeing a V-shaped recovery there. Goldman also sees improvement in Europe as the 2010 is nearing, and improvement in key U.S. retailers. There may be a currency risk in Venezuela. They believe that Nike shares typically outperform post a trough in the economy, and see investors with favorable reactions to top-line improvement. Risks include a deterioration in global spending, and limited sales upside from the World Cup.

THROUGH Q210:
Barron's wrote an article early into Nike's second quarter, speculating that the company would have a stronger margin expansion through the quarter and be able to report stronger earnings.

Nike's conference call for Q110 made some comments about the future. The CFO stated that they expect revs to be down in the low-to-mid single digits. They also expected to see gross margins below the prior year.

In larger news, the IOC said that they would include golf for the 2016 summer Olympics in Rio de Janeiro, Brazil.

Finally, Tiger Woods' accident on the morning of November 27, 2009, was a shock to most of the U.S. Considering Tiger built up Nike's $650 million golf segment, look for an minor impact in the future, but not too much for this quarter.

Nike is expected to report their Q210 earnings at 4:15pm EST on December 17, 2009. Stay tuned to StreetInsider.com's Earnings section to see our analysis of the highly-anticipated quarterly results within seconds of their release.

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