There’s a lot the stock market has to deal with these days, but that’s par for the course. Uncertainty, risk, and fear are basic components of equities these days. But good businesses are good businesses and NIKE, Inc. (NKE) hit a grand slam with its latest quarterly earnings.
This company’s been doing well for a number of quarters and this is a mature brand we’re talking about, not a fast-growing startup.
The momentum began before the World Cup, culminated in its previous quarter, and now, the company just produced another top-notch batch of financial results. The stock shot nine points higher on the news to a new all-time record-high.
According to NIKE, its first fiscal quarter of 2015 (ended August 31, 2014) saw total sales grow 15% to $8.0 billion. The company also owns the “Converse” label and that division’s sales grew 16% in the most recent quarter to $575 million.
NIKE has a good amount of cash on its books and the company spent $819 million buying back its own shares in its first quarter. Since September of 2012, the company has spent approximately $4.2 billion buying back its own stock at an average cost of $67.74 a share, which, as it turns out, has been a very good investment (for the company and shareholders alike). About $3.8 billion over the next two years is left in the share repurchase authorization.
As for its bottom line, NIKE’s earnings grew 23% to $962 million, or 27% on diluted earnings per share to $1.09.
One of the things that NIKE does is it comments on future orders. According to the company, global orders for all NIKE-branded footwear and apparel for delivery between September 2014 and January 2015 are up 11% over last year.
So the momentum continues for this company, and I see no reason why this stock won’t keep ticking higher going into the 2015 calendar year. (See “Eight Stocks to Beat the Street.”)
NIKE has a very good balance sheet, institutional investors are buying Wall Street upgrades of the stock, and the company has a very good track record of increasing its dividends to shareholders. With more share repurchases on the horizon, it’s a good bet shareholders can expect another dividend increase in the near future as well.
Accordingly, this position should keep doing well even though it just broke through to a new record-high and isn’t cheaply priced.
Double-digit sales and earnings growth is a tough thing to come by in the current environment, especially from a dividend-paying blue chip. That’s why NIKE soared so strongly after reporting its great quarter: big investors want what NIKE has to offer.
I suspect this position will consolidate after its huge move on the stock market, but a company like NIKE is still a long-term equity investment to consider on any major price weakness. The company also offers a bit more growth potential over many other large-caps, has good financial metrics, and for a well-established global brand, it’s executing very strongly.