Why Manchester United (MANU) Stock Is Soaring On Monday

NEW YORK (TheStreet) --Shares of Manchester United PLC (MANU) are gaining 5.46% to $18.75 in mid-afternoon trading on Monday after the British soccer club signed a 10-year, $1.3 billion deal with Adidas AG (ADDYY).

The record breaking deal makes the German sports footwear, apparel, and accessories retailer Manchester's new kit sponsor, ending the team's 13-year relationship with Nike (NKE), The Guardian reports.

The agreement takes effect at the beginning of the 2015-2016 season. Nike will continue to act as Manchester's technical sponsor and trademark licensee for the 2014-2015 season.

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Separately, TheStreet Ratings team rates MANCHESTER UNITED PLC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate MANCHESTER UNITED PLC (MANU) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we find that the company's profit margins have been poor overall."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • MANU's very impressive revenue growth greatly exceeded the industry average of 14.6%. Since the same quarter one year prior, revenues leaped by 63.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • MANCHESTER UNITED PLC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, MANCHESTER UNITED PLC increased its bottom line by earning $1.37 versus $0.22 in the prior year. This year, the market expects an improvement in earnings ($17.04 versus $1.37).
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
  • The debt-to-equity ratio is somewhat low, currently at 0.70, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that MANU's debt-to-equity ratio is low, the quick ratio, which is currently 0.57, displays a potential problem in covering short-term cash needs.
  • The gross profit margin for MANCHESTER UNITED PLC is currently lower than what is desirable, coming in at 34.63%. Regardless of MANU's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 9.43% trails the industry average.
  • You can view the full analysis from the report here: MANU Ratings Report
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