Tic-tac-toe, investors want to know: After beating expectations in each of its first two quarterly reports, can Nike (NYSE: NKE) make it three in a row? Fiscal Q3 2008 earnings are due out Wednesday afternoon.

What analysts say:

  • Buy, sell, or waffle? Seventeen analysts pace Nike, giving the stock a dozen buy ratings, four holds, and a sell. Our CAPS community rates the company four out of five stars.
  • Revenues. On average, they're looking for 11% sales growth to $4.36 billion.
  • Earnings. Profits are predicted to sprint ahead 17% to $0.81 per share.

What management says:
The big story in sportswear these days seems to be Under Armour's (NYSE: UA) move into footwear. I've seen market commentators arguing that UA is betting the store on this push into shoes -- but Nike doesn't face that problem. As CEO Mark Parker observed in last quarter's post-earnings conference call, "the second quarter shows the benefit of having multiple levers to pull across categories, geographies and throughout the portfolio. This gives Nike a lot of flexibility especially in shifting macroeconomic conditions. This flexibility has helped Nike consistently outperform our competitors."

What management does:
Although its net margin tripped a bit last quarter, Nike's profit margins have been generally improving over the past year. Operating margins aren't quite up to par with those of UA or Columbia Sportswear (Nasdaq: COLM), or Crocs (Nasdaq: CROX) or Deckers (Nasdaq: DECK) -- but across a much broader spectrum of products, they're still pretty respectable, and fall above the industry average.

Margins

8/06

11/06

2/07

5/07

8/07

11/07

Gross

43.8%

43.7%

43.9%

43.9%

44.1%

44.3%

Operating

13.2%

12.8%

12.6%

13.1%

13.3%

13.2%

Net

8.7%

8.7%

8.7%

9.1%

10.0%

9.9%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
One subject that Parker touched on in last quarter's conference call is near and dear to my heart: inventories. Parker observed that Nike continues to "manage down'" its inventory levels. The story here stands in stark contrast to what we've been telling you about UA in quarters past. Whereas Nike's upstart competitor doubled inventories last quarter, Nike held its inventories to just a 2.6% rise, against 13.5% sales growth. Similarly, accounts receivable increased just 10.2%, which was again below the sales growth trend. Why is this important? Because by refusing to tie cash up in unsold goods and uncollected bills, Nike has nearly doubled its free cash flow in the first half of this year, to just under $750 million. Granted, that's still not as good as the net profit numbers that Nike reports, but the trend is moving in the right direction. Let's hope for more of the same on Wednesday.

We've seen where it's going, but where's Nike coming from? Find out in:

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Fool contributor Rich Smith does not own shares of any company named above. The Motley Fool has a disclosure policy.