Nike (NKE - Get Report) is continuing its huge run. The company's stock hit an all-time high in after hours trading, following the release of its second-quarter earnings after market close. The stock eclipsed $136 after hours; it has since come back down to earth in early trading today and is hovering above $132. 2015 has officially been the greatest calendar year in Nike's history as the company shipped over 1.1 billion units.NKE data by YCharts
Nike beat on earnings in the second quarter but missed its revenue target by $120 million (on nearly $8 billion in revenue) primarily due to strong currency headwinds; the company produces 50% of its sales outside of North America. Earnings-per-share (EPS) came in at $0.90, a 22% increase year-over-year (YoY), beating analyst's estimates by 4 cents. Nike saw double-digit category growth in all of its regions on a currency neutral basis.
Footwear sales continued to fuel growth for the company with an 8% increase to $4.592 billion. Nike continues to innovate and release new products that are particularly resonating with consumers. The company has recently released the Kyrie 2, Jordan 29 low, and Kobe 11 models. Greater China had a particularly strong performance as revenue increased 28% while its direct-to-consumer business saw a 51% percent increase. Nike's North American market has never been stronger, with revenues up 10% and futures up 14%.
Nike's e-commerce business is a key factor moving forward as the second quarter saw the company enter three new direct-to-consumer markets: Canada, Switzerland, and Norway. The company plans to reach Mexico, Turkey, and Chile in 2016. E-commerce sales are expected to reach $7 billion by 2020. To put that into perspective, one of Nike's key competitors, Under Armour, plans to reach $7.5 billion in total revenue by 2018. Nike has an ambitious plan to reach $50 billion in revenue by 2020.
The company's stock has been performing very strong, up over 37% year-to-date (YTD). 2015 saw the company has increase its dividend for the 14th year consecutive year, announce a 4-year $12 billion dollar stock repurchase program, and is anticipating a 2-1 stock split.
Nike has announced also a two key strategic partnerships in the second quarter, with Dreamworks new technology company Nova and global manufacturer Flex. Nova is a 3D digital design system that Nike intends to use to drive further innovation not seen in the industry. The partnership with Flex intends to build products that reach consumers more quickly with more customization, while reducing waste by up to 50%
As the athleisure trend was a staple of wardrobes in 2015 and fueled the growth of most athletic apparel brands, Nike has performed exceptionally well in a weak retail environment. Future guidance is that Nike continues to perform well even as its closest competitors Adidas and Under Armour have picked up steam in 2015, both opening corporate offices in Nike's backyard in Oregon. With the Rio Olympics coming up, Nike should be able to continue its momentum going into 2016.
Recently, TheStreet Ratings, TheStreet's proprietary ratings tool, objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate NIKE INC as a "Buy" with a ratings score of A+. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company shows weak operating cash flow.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 37.79% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, NKE should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- NIKE INC has improved earnings per share by 22.9% 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. During the past fiscal year, NIKE INC increased its bottom line by earning $3.70 versus $2.98 in the prior year. This year, the market expects an improvement in earnings ($4.30 versus $3.70).
- The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Textiles, Apparel & Luxury Goods industry average. The net income increased by 22.6% when compared to the same quarter one year prior, going from $962.00 million to $1,179.00 million.
- NKE's revenue growth trails the industry average of 16.7%. Since the same quarter one year prior, revenues slightly increased by 5.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- NKE's debt-to-equity ratio is very low at 0.09 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, NKE has a quick ratio of 1.69, which demonstrates the ability of the company to cover short-term liquidity needs.
- You can view the full analysis from the report here: NKE