Will Tomorrow's Nike Earnings Move the Dow?

With its entrance into the Dow Jones Industrials (DJINDICES: ^DJI  ) earlier this year, Nike (NYSE: NKE  ) redefined the start of the quarterly Dow earnings season, jumping the gun on most companies because of its off-calendar fiscal year. But even as investors celebrated Nike's success by sending shares to record highs earlier this month, the big question is whether the athletic-wear giant can justify its place in the blue-chip index by continuing to dominate the industry despite challenges from Adidas (NASDAQOTH: ADDYY  ) and Under Armour (NYSE: UA  ) .

Nike has done an excellent job over its long history in making moves to enhance its brand presence both in the core North American market and around the world. Those efforts have boosted the value of Nike's brand into the top 25, according to Interbrand, with a global value of more than $17 billion. Nike has translated that brand into premium sales, getting consumers even in less economically prosperous regions to pay up for its products. Yet Adidas and Under Armour have no intention of letting Nike win without a fight, and they've worked harder recently to cement their own growth prospects in athletic apparel. Let's take an early look at what's been happening with Nike over the past quarter and what we're likely to see in its report that could move the Dow.

Stats on Nike

Analyst EPS Estimate

$0.58

Change From Year-Ago EPS

1.8%

Revenue Estimate

$6.47 billion

Change From Year-Ago Revenue

8.6%

Earnings Beats in Past 4 Quarters

4

Source: Yahoo! Finance.

Can Nike earnings keep jumping higher this quarter?
Investors have seen a mixed picture from analysts following Nike earnings recently, as they've cut estimates by $0.03 per share for the quarter ended in November but boosted their full-year fiscal 2014 projections by the same amount. The stock has climbed 13% since mid-September, despite giving back some ground over the past couple of weeks.

Nike's earnings report from the quarter ended in August sent the stock higher, but it also showed the challenges that the company faces. Nike saw the greatest strength in its North American and European markets, with sales gains in the 8%-10% range. Yet emerging markets, where many retailers have looked for potential growth, saw much weaker results. Overall, Nike's emerging-market revenue rose 5%, but especially disturbing was a 3% drop in sales in the key Chinese space. Still, investors focused on the athletic giant's 38% rise in earnings to send shares higher.

Nike's tenacity in both defending its turf and expanding into lucrative markets has been a key ingredient of its long-term success. For a long time, Adidas has had a commanding position in the global soccer market, but recent efforts from Nike to go after its rival head-on have resulted in market-share gains in the sport, as well as bolstering its overall European sales. With qualifying complete for the 2014 World Cup, Nike and Adidas will spend the next six months battling for position leading up to the tournament in Brazil.

Nike can't afford to let down its guard, though. Under Armour has ambitious plans to continue its impressive growth, looking to relatively untapped markets like women's athletic apparel and innovating with new apparel designs and technology. Adidas has looked to change the complexion of the NBA with new sleeved jerseys that have drawn both praise and criticism from various corners. Yet despite Under Armour's and Adidas' best efforts, Nike continues to make itself attractive to a new generation of shoppers, as high brand loyalty among teens has helped it set the stage for years of future growth.

In the Nike earnings report, watch to see where the company's growth has come from most recently to see whether Adidas or Under Armour  are having any effect on the apparel giant's dominance in particular areas. For the most part, though, Nike looks poised to be a solid performer, earning its spot among the Dow Jones Industrials with its continued leadership.

The one area Nike could improve
If there's any complaint that investors have about Nike, it's that the company's 1.2% dividend yield doesn't compete on the income-investing front. If you prefer bigger dividends, check out The Motley Fool's brand-new special report, "The 3 Dow Stocks Dividend Investors Need." It's absolutely free, so simply click here now and get your copy today.

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