Bull of the Day: Nike (NKE)

Nike (NKE) is easily one of the most recognizable brands in the world and the company clearly dominates a variety of areas in the broader apparel market. However, a number of upstarts have begun to slowly eat into Nike’s market share, or are threatening to take bigger leaps into long-dominated areas of Nike’s empire.

While this has been a bit of a concern as of late, Nike has defended its key markets pretty well and could see continued strength as we head into the holiday season with oil prices slowly trickling lower (and thus putting more money in consumers’ pockets). This is especially true if investors consider the company’s most recent earnings report, and their own near term outlook.

Nike Earnings and Outlook

In the firm’s most recent report, EPS came in at $1.09 share which was a 27% year-over-year increase, and a mark that easily crushed the consensus estimate of 88 cents a share. Strong sales (15% growth) largely were the reason for this beat, though improving margins and a stock buyback also helped.

Nike management also boosted their outlook in the most recent report, projecting strong EPS growth in the high teens for the quarter, while nearly 20% growth in fiscal 2015. The company also expects higher gross margins with an improvement of between 125-150 bps, suggesting that increased growth levels will definitely be helped by higher levels of profitability.

Earnings Estimates

Thanks to this bullish outlook and the relatively favorable situation for many consumer discretionary firms heading into the final part of the year, it shouldn’t be too surprising to note that NKE analysts have been raising their estimates following this report.

In fact, 10 estimates have gone higher for the current quarter in the past 30 days, compared to just one lower. Meanwhile for the full year time frame, 15 estimates have gone higher in the last month, compared to zero lower, suggesting total agreement among covering analysts in our universe.

Investors have also seen a modest uptick in the consensus estimate as a result of these trends, pushing the current quarter estimate higher by two cents in the last month. The current year saw a much more meaningful increase though, as it moved from $3.40/share 30 days ago to $3.59/share today, pushing the projected growth rate (yoy) close to 21%.

Bottom Line

With these figures, it should be clear why NKE has earned itself a Zacks Rank #1 (Strong Buy) and why we are looking for outperformance from this company in the months ahead. The company has an ultra-strong brand, is seeing improving margins, and pretty much all the analysts believe that the company’s near term prospects are bright.

If that wasn’t enough, investors should also consider that NKE’s industry is in the top 30%, suggesting it has pretty great company and that the whole space is looking favorable.  So if you are looking for a strong consumer stock heading into the holidays, definitely consider some of the key stats above and take a closer look at Nike for your portfolio.

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NIKE INC-B (NKE): Free Stock Analysis Report

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