Buy Nike Stock After Crushing Its Q1 Expectations?
Crushing expectations for its fiscal first quarter after market hours on Tuesday, Nike NKE stock spiked over +6% in today’s trading session.
Despite weaker digital sales and ongoing challenges in China due to higher tariffs, Nike’s strong Q1 results were driven by a combination of favorable wholesale distribution, growth in its core North American segment, and effective cost management.
That said, investors may be wondering if they should chase the post-earnings surge in Nike stock, with NKE moving closer to its 52-week high of $85 a share after hitting a multi-year low of $52 in April.
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Nike’s Strong Q1 Results
Although Nike’s Q1 earnings of $0.49 per share dropped from $0.70 in the comparative quarter, the retail apparel leader crushed EPS expectations of $0.27 by 81%. This came on Q1 sales of $11.72 billion, which rose from $11.58 billion a year ago and comfortably topped estimates of $11 billion by 6%.
Amid the noticeable decline on its bottom line, Nike has still surpassed the Zacks EPS Consensus for nine consecutive quarters with a very impressive average earnings surprise of 53.71% in its last four quarterly reports.
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Nike’s Revenue Guidance
Acknowledging a dynamic operating environment for both consumers and its global business, Nike stated it remains focused on “win-now” actions but expects revenue for the second quarter of its current fiscal year 2026 to decline by low single digits. This was on par with the current Zacks Consensus of $11.95 billion or a 3% decline (Current Qtr below).
Additionally, Nike anticipates Q2 gross margins to be down approximately 300 to 375 basis points, including a net headwind of 175 basis points from new incremental tariffs.
Based on Zacks' estimates, Nike’s total sales are expected to dip 1% in FY26 but are projected to rebound and rise 6% in FY27 to $48.59 billion.
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Monitoring Nike’s Valuation
Optimistically, Nike stock is trading near the optimal level of less than 2X forward sales, with its Zacks Shoes and Retail Apparel Industry average at 1X. However, NKE trades at a 41.7X forward earnings multiple, a noticeable premium to the benchmark S&P 500 and its industry average of 21.7X.
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Bottom Line
Showing signs of a turnaround, Nike stock currently lands a Zacks Rank #3 (Hold). Earnings estimate revisions are likely to rise after Nike's strong Q1 results, but a considerable jump in EPS projections may be needed to move the needle for a buy rating, given the company's moderately stretched P/E valuation.
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NIKE, Inc. (NKE): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
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