NKE Stock Offers Growth in a No-Growth World
Do you believe that a mature brand like NIKE, Inc. (NYSE:NKE) stock could be a stock market winner in 2016? I do. And the reason for it is because nothing has changed since January of 2013.
It’s an unpredictable, slow-growth world and institutional investors want only one thing in all of this uncertainty—earnings predictability.
Nike stock offers a solid “package” of attractive attributes. The company has its business model down pat. In a very real sense, all Nike has to keep doing is what it’s been doing and not mess up what it’s already created.
This business is less susceptible to an earnings hit in a rising interest rate environment. Individual customers or sports teams aren’t going to delay a purchase based on the fed funds rate. Earnings growth is projected to grow by double-digits each year for the rest of this decade. There are good prospects for rising company dividends going forward and Nike’s business plan is to keep buying back a lot of its own shares.
It’s a solid package—a “special situation” of its own making. Nike stock could be a portfolio benchmark position for the next several years.
The company’s stock chart is featured below:
Chart courtesy of www.StockCharts.com
Across the board, Wall Street earnings estimates for Nike have been going up for this fiscal year and next. Almost half of Nike’s total revenues still come from the North American market and this segment is still producing solid comparable business growth. In the recent six-month period ended November 30, 2015, Nike’s North American segment sales improved about nine percent comparatively over the same period in 2014.
Western European sales, however, remain pretty flat, but the Street expected that. Meanwhile, Greater China sales improved approximately 27% in the same recent six-month period. This segment represents about 11% of the company’s total sales.
A strong North American performance, especially from such a mature enterprise, is a very important attribute in today’s capital markets. The U.S. economy remains the best big-market global economic engine; it’s still the best risk-adjusted place for equities.
The Bottom Line on Nike Stock
The story with Nike stock isn’t its top-line growth; it’s the company’s earnings per share, which, in the most recent six-month period, improved 23% comparatively.
Going forward, Wall Street currently expects approximately 16% in total earnings growth this fiscal year and about 15% so far for the company’s next fiscal year.
Earnings predictability is critical in today’s equity market. It’s what institutional investors have been buying on since the beginning of 2013 and it’s an investment theme that should continue in an uncertain, slow-growth 2016.
Nike stock recently completed a well-deserved two-for-one share split. NKE stock is just the kind of stable growth business that makes for a welcome addition to investment-grade portfolios. It’s a $100-billion business that’s still growing by the double-digits.
Please note: This article is not to be construed as a Buy recommendation for NKE stock, but rather is meant to highlight an example of the kind of stock investors should look for in 2016.