Should Investors Still Hold Nike or Starbucks Stock for a Rebound?
Shaking up their management teams, Nike NKE and Starbucks SBUX hope to return to glory after experiencing slower growth in recent years.
Nike recently announced its CEO John Donahoe will retire on October 13 after taking over the helm in 2020 and serving on the board of directors since 2014. Donahoe will be replaced by longtime executive Elliot Hill who joined Nike in 1998 as a sales intern.
Meanwhile, Starbucks appointed Brian Niccol as its new CEO last month who previously served as the head of Chipotle Mexican Grill CMG and is credited for the restaurant chain's immense probability.
NKE Stock Falls After Earnings
Despite exceeding earnings expectations for its fiscal first quarter after hours on Monday, Nike’s stock fell over -5% in Tuesday’s trading session as the iconic shoes and apparel retailer withdrew its full-year guidance. Nike posted Q1 earnings per share (EPS) of $0.70 which crushed estimates of $0.52 a share by 34% although this was a drop from $0.94 per share in the comparative quarter.
Sales of $11.58 billion slightly missed estimates of $11.65 billion and decreased -10% from Q1 sales of $12.93 billion a year ago.
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Similarly, Starbucks had mixed results for its most recent fiscal third quarter report in July. Starbucks was able to reach EPS expectations of $0.93 but missed sales estimates of $9.22 billion by -1%. Furthermore, Starbucks registered a slight decrease on its top and bottom lines from the prior year quarter as well with its next quarterly report scheduled for Nov. 7.
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NKE vs. SBUX Stock Performance Comparison
Year to date, Nike’s stock is down more than -20% with Starbucks shares virtually flat. Both have noticeably underperformed the broader indexes with it noteworthy that NKE is -46% from its 52-week high of $123 a share last December while SBUX is -11% from its 52-week peak of $107 seen last November.
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China Optimism for Both Companies
Optimistically, Nike and Starbucks’ large presence in China may be appealing to long-term investors. To that point, China’s newly implemented stimulus package includes the injection of over one trillion yuan ($142 billion) into its financial sector, lowering reserve requirements for banks, and reducing key interest rates which should increase consumer spending.
NKE & SBUX EPS Outlook
Based on Zacks estimates, Nike’s total sales are expected to dip -5% in its current fiscal 2025 but are forecasted to stabalize and rise 4% in FY26 to $50.7 billion. Nike’s annual earnings are expected to drop -23% in FY25 to $3.04 per share versus EPS of $3.95 in FY24. However, FY26 EPS is projected to rebound and rise 13% to $3.45.
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Pivoting to Starbucks, its top line is expected to increase 1% this year and is projected to expand another 6% in FY25 to $38.72 billion. Starbucks' EPS is slated to be flat in FY24 but is expected to increase 10% in FY25 to $3.92.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
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Bottom Line
While the storied brands of Nike and Starbucks don’t appear to be broken there could certainly be better buying opportunities although patient investors may see value at their current levels. That said, Nike's stock lands a Zacks Rank #3 (Hold) with Starbucks landing a Zacks Rank #4 (Sell) after a string of consecutive earnings misses prior to its most recent quarterly report.
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NIKE, Inc. (NKE) : Free Stock Analysis Report
Starbucks Corporation (SBUX) : Free Stock Analysis Report
Chipotle Mexican Grill, Inc. (CMG) : Free Stock Analysis Report