Can Nike Stock Still Be a Stock Market Winner?
Nike, Inc. (NYSE:NKE) continues to be pretty amazing, pushing new highs in what is a mature market with a lot of currency risk to deal with. Yet Nike stock, the mature footwear and apparel company which now sports a market capitalization over $100 billion, is still a double-digit earner.
This is one of those unique brands that keeps on executing its business plan well. Nike stock has proven to be worth accumulating when it’s down. Historically, it isn’t down for long on the stock market.
Not surprisingly, the company’s Chinese business is growing at the fastest clip. But North American comparable sales remain strong as well. Western European revenues were stagnant in the company’s most recent quarter.
What Will Take NKE Stock to the Next Level?
Nike’s total global sales are made up of approximately 65% in footwear, with apparel, equipment and brand licensing making up the rest.
Nike owns the Converse brand of athletic shoes. Total sales in this division are about 10% of total footwear revenues.
One thing that the company does is report “futures orders,” which is a forecast of shipments.
For the current quarter (September to December), reported futures orders are up 14% comparatively in the North American market segment. A six percent increase in expected for Western Europe; while Greater China futures orders growth is currently forecast to be 22% over the same quarter last year.
Greater China sales are catching up fast to other geographic regions. Shortly, they will represent a full quarter of Nike’s total global revenues, and most interestingly, this regions profitability for the company is exceptional.
The stock chart for NYSE:NKE is featured below:
Chart courtesy of www.StockCharts.com
Similar to other global brands, Greater China sales are the most important driver of news growth. This makes currency stability in that region a very important contributor to financial results.
Nike has plenty of cash on its books, most of which is held in foreign subsidiaries.
I would really like to see more dividends from the company. The stock is definitely due for another share split. I think this would be very helpful for shareholders.
I see NKE stock as worthy of serious consideration on material price retrenchments. Not that the stock isn’t fully priced. This large-cap is still a growth story, which given its size, is a major accomplishment.
Over the last month or so, Wall Street earnings estimates for the company have been going up across the board for multiple periods going forward.
This is one of those unique businesses that has historically beaten or outperformed the business cycle. And it’s done so on a global basis.
Currency risk with a multinational like Nike is a big deal. Like most big-cap companies, they employ derivative financial instruments to help mitigate currency fluctuations.
The company’s most recent quarter was exceptionally good and the stock reflects this.
I see no reason why this stock can’t keep ticking higher throughout 2016. Nike stock is poised for more capital gains.