Nike beats estimates
Will the athletic retailer beat year-over-year expectations?
Global athletic apparel retailer Nike (NKE) continued strong operational momentum in its fiscal second quarter, reporting profit of $469 million, or $1 per share, up from $457 million, or 94 cents a share, in last year's second quarter.
The results beat Wall Street analyst estimates of 97 cents a share. The company cited strong consumer demand, expense leverage and a lower average share count in driving the strong results.
Net sales for the second quarter came in at $5.73 billion from $4.84 billion a year earlier. This also beat analysts' consensus estimates of $5.63 billion. Future orders at the Beaverton, Ore. company rose 13% year-over-year.
But despite the overall upbeat report, gross margins at Nike fell from 45.3% a year earlier to 42.7% in the most recent quarter. This is a metric that investors will want to continue to pay attention to going forward.
Still, investors were pleased with the results, sending Nike shares up 2.5% in after-hours trading to $95.95.
The Nike portfolio is "a powerful engine for growth," said CEO Mark Parker in a statement Tuesday. "Going forward we'll continue to use the unique power of our portfolio to drive growth, manage risk and connect with consumers."
Despite the beat, Nike's stock has done little over the course of the year, and it looks as though it will close 2011 nearly unchanged from the start of the year. Long-term shareholders of Nike may take solace in the fact that the company has managed to beat expectations, but may be disappointed by the lack of growth. However, all things considered, Nike's stock has been roughly in line with the broader performance of the market.
While investors may be concerned about declining margins, the company has once again underscored its solid growth profile and dominant position in the global athletic apparel market. In the last three months, Nike shares have risen 4.66% and are roughly $3 below all-time high prices.
The company's second-quarter results will likely do little to discourage investors going forward, but they also may not be enough to appreciably move shares higher in the near-term without a rally in the broader market.
Traders who like Nike may consider the following trades:
- Go long Nike. The stock is up only 1.5% in after hours trading. Should the company continue to deliver, investors could still find that the stock is at an attractive valuation.
- Go long a Nike distributor, such as Foot Locker (FL). Better product could translate into a positive for the retailer.
Traders who believe that Nike's earnings are not indicative of the company's future performance may consider alternative positions:
- Buy puts on Nike. If the stock pulls back, puts could be an attractive way to play the downside to the stock.
- Take a position in another company in the footwear industry.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
Serious issues like drought and the deterioration of the developed world spell opportunity for this industry leader.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.