After reporting stronger than expected earnings last night after the close, Nike (NKE) is set to open at a new all-time high this morning.  As highlighted in a post yesterday and shown in the chart below, the stock has been bumping up against resistance at the $90/share mark for all of 2019, but that resistance will be broken when the opening bell rings this morning based on where shares are trading in the pre-market.

The stock is currently up 5% in pre-market trading, which would be the 14th time NKE has opened higher by 5%+ on earnings since 2001.  Below is a snapshot of the prior thirteen 5%+ gaps higher for NKE on earnings pulled from our popular Earnings Explorer tool.  Notably, when these gaps higher have occurred, the stock has typically continued higher from the open to the close of trading as well.  As shown in the “Open to Close” column, NKE has traded up from the open to the close after its initial 5%+ gap higher 9 out of 13 times for an average open to close gain of 1.25%.  Start a two-week free trial to Bespoke Institutional to access our interactive Earnings Explorer and much more.

Regional banks (KRE) never entirely recovered from last year’s Q4 downturn and have underperformed both the broader market and the rest of the financial sector since. But one silver lining is that the group is attractive with regards to dividends.  Of the regional bank stocks in the S&P 1500, 85% have a yield that outpaces the index and 63% have a higher yield than the financial sector.  Currently, the average regional bank stock in the S&P 1500 yields 2.73%. One of the ones that yields even more at 4.2% is KeyCorp (KEY).  Additionally, unlike some of the other regional bank stocks that have elevated yields due to downtrends over the past year, KEY has a more attractive chart and is actually sitting in a modest uptrend having made a series of higher highs and higher lows since the start of the year.  Currently, the stock is experiencing mean reversion after reaching overbought levels.

Given this uptrend, the desirable yield has more been a result of steady and more recently rapid growth in the dividend rather than declines in stock price as is the case with other regional banks. Today, that dividend is 30% larger than it was just five years ago. That is more than twice the average growth of all regional bank stocks over the same time frame and nearly triple that of all financial stocks in the S&P 1500.  Most of that growth has occurred in the past couple of years alone.  More specifically, last September KEY raised its quarterly dividend by 5 cents (from $0.12 to $0.17), rather than the one-cent increases observed in previous years. The most recently declared dividend was also raised another 2 cents to $0.19. With a payout ratio of 42%, KEY has some safety in its dividend; even with this recent growth. Start a two-week free trial to Bespoke Institutional to access our interactive Security Analysis tool and much more.

After the bell today, Nike (NKE) is scheduled to report third-quarter results.  The stock has been pretty flat over the past six months swinging between ~$89 and ~$76, although, it has put in a series of higher lows since the start of 2019.  Earlier this month marked yet another failed attempt (third time testing these levels) of NKE to break out, but over the past few weeks since that test of resistance, the stock has been coiling not far off these levels.  All of this is in the context of a longer-term uptrend over the past couple of years, which means a solid earnings report could be just the catalyst needed to send the stock to new highs.

NKE is forecasted to report EPS of 71 cents and revenues of $10.4 billion. If the company meets these top-line estimates, it would be a record sales figure, representing a 4.88% growth rate YoY. In regards to EPS though, NKE is coming off of a disappointing quarter.  Looking at the past several years of earnings data for NKE in our Earnings Explorer, after 27 consecutive quarters with an EPS beat, the company missed estimates by 4 cents back in June. Despite this, the stock price did not see any excessively negative reaction. In fact, NKE traded up 0.35% on its earnings reaction day which is not necessarily unusual as the stock’s price reaction to earnings has historically held a positive bias.  On average, NKE has finished the day after earnings higher by 1.55% and has been positive 63% of the time. Start a two-week free trial to Bespoke Institutional to access our interactive Earnings Explorer and much more.

While last week’s surge in oil prices after the attacks on Saudi Arabian oil facilities stoked concerns of a spike higher in gas prices, the rally has already started to fizzle out. As of yesterday, the national average price of a gallon of gas was $2.66, and while that’s ten cents higher than where prices were before the attacks, we’ve already started to see prices ease for three days in a row now.  With a YTD gain of 17.9%, this year’s move has now been slightly above the historical average (17.3%) dating back to 2005 and well above the median of 12.6%.

The chart to the right compares the change in gas prices so far this year to a composite of the YTD change for all years since 2005.  Prior to the attacks in Saudi Arabia, prices were trending modestly below the historical average, but now prices are right in line with the historical average.  If the pattern continues to hold, we should see prices resume their downward trend from now until year-end.

Given the seasonal nature of gas prices, where they are now versus six months ago probably isn’t as important as the year/year change.  If prices are lower now than they were at this time last year, consumers will feel more flush while higher prices may crowd out spending in other areas.  After about two years where gas prices were consistently higher on a y/y basis, we’ve recently seen a trend where prices have been down modestly.  While the decline probably hasn’t been big enough to have a big impact, at the margin, consumers have seen a bit of a tailwind from lower prices.  Start a two-week free trial to receive our market research and access our interactive tools.