There are lots of benchmark stocks, but NIKE, Inc. (NKE) is an incredibly important one in retail.
It’s actually quite surprising that such a mature brand can continue to do as well as it does. Not only is the company succeeding operationally, but it continues to be an excellent stock market investment.
The company’s earnings results in the first quarter of this year were very good, and there’s been some worry that second-quarter numbers would be soft, commensurate with all the economic data we have been getting.
But that was not the case as the company’s second-quarter earnings were excellent.
Earnings season is always the most important time of year, and it certainly helps to divert investor attention from all the worries in the world. There’s been a real focus on what the Federal Reserve is going to do with quantitative easing. As odd as this may be, the stock market went up on weaker economic data in the hopes that quantitative easing would continue through to 2014.
NIKE said that its fiscal fourth-quarter sales grew seven percent to $6.7 billion, or nine percent on a currency-neutral basis.
The company experienced growth in all geographic regions except for Western Europe and China. Sales were stronger for running, basketball, and men’s and women’s training shoes, offsetting slightly weaker sales in sportswear, action sports, and soccer.
Earnings grew an impressive 25% to $696 million. With a two-percent reduction in average common shares outstanding, diluted earnings per share grew 27% to $0.76. This is an excellent performance from such a mature brand.
NIKE’s stock chart is featured below:
Chart courtesy of www.StockCharts.com
NIKE has proven to be a solid equity market investment. According to the company’s history, it’s never down for long.
Similar to the company’s first quarter, the standout in NIKE’s latest earnings report was its strength in the North American market. Footwear, representing about half of the company’s total sales in the North American market, grew seven percent, while apparel sales grew 22%, and equipment grew 24%.
Also noteworthy was the company’s huge increase in its cash balance, growing 44% to $3.34 billion over the comparable quarter.
The company has been steadily increasing its annual dividends over the last five years. The huge increase in NIKE’s cash balance suggests another quarterly increase is likely this year.
NIKE has now doubled in value on the stock market since 2010, not including its dividends. The company’s long-term stock market performance is exemplary and history suggests that an investment in NIKE may be a worthwhile long-term endeavor.
Mitchell Clark is a senior editor at Lombardi Financial, specializing in large- and micro-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, including Micro-Cap Reporter, Income for Life, Biotech Breakthrough Stock Report, and 100% Letter. Mitchell has been with Lombardi Financial for 17 years. He won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was a stockbroker for a large investment bank. In the... Read Full Bio »
Forecasts Aug. 27, 2015
Immediate term outlook:
The bear market rally in stocks that started in March 2009, extended because of unprecedented central bank money printing, is coming to an end. Gold bullion is up $1,000 an ounce since we first recommended it in 2002 and we are still bullish on the physical metal.
Short-to-medium term outlook:
World economies are entering their slowest growth period since 2009. The Chinese economy grew last year at its slowest pace in 24 years. Japan is in recession. The eurozone is in depression. With almost half the S&P 500 companies deriving revenue outside the U.S., slower world economic growth will negatively impact revenue and earnings growth of American companies. Domestically, America’s gross domestic product grew by only a meager 2.3% in the second quarter, which will negatively impact an already overpriced equity market.
Estimates Aug. 27, 2015
Trailing 12-month EPS for Dow Jones companies (Most Recent Quarter)