NIKE Inc. (NYSE:NKE) Undervalued, Again…
NIKE, Inc. (NYSE:NKE) reported an impressive growth while announcing its first quarter 2014 results. The first quarter ended August 31 proved strong demand for NIKE brands with revenues up 8% to $7.0 billion. The company said revenues for the NIKE brand increased 7% reaching to $6.5 billion. NIKE, Inc. (NYSE:NKE) witnessed growth in every product type and every geography, except Greater China. Revenues from running, football (Soccer), basketball, and Men’s training category rose, while sportswear saw a slight decline. The company’s net income jumped 33% to $780 million while diluted earnings per share rose 37% to $0.86.
During the first quarter, NIKE, Inc. (NYSE:NKE) announced that it repurchased 8.4 million shares that were worth $526 million. The share repurchase was part of the company’s 4-year $8 billion program which was approved by the board in September of last year. As of the end of the first quarter, the company had repurchased 23.7 million shares in total at about $1.3 billion.
Chief Executive Officer and President Mark Parker claimed the company had a great first qaurter which was driven by innovative products and services.
The company’s performance is way ahead of its peers in most mature markets, with 8-10% reported revenue growth in North America, Western Europe and Central and Eastern Europe. In emerging markets, excluding China, NIKE, Inc. (NYSE:NKE) sales grew 5%, China growth fell 3% in revenues.
NIKE, Inc. (NYSE:NKE). expects 8% increase in its orders scheduled to be delivered in the next quarter (between September and January).
As of August 31, the company had $5.6 billion in cash, equivalents and short-term investments. In addition, total debt was at $1.4 billion.
NIKE, Inc. (NYSE:NKE) pays a quarterly dividend of $0.21 per share, for an annual dividend yield of 1.1%.
From a Seeking Alpha article, by The Value Investor:
“Over the past decade, Nike has been a true power house expanding rapidly in key global sports, supported by marketing efforts of global sports stars. More recently the advancement of the brand has been pushed by technological gadgets.
Between 2003 and 2013, shares have risen from merely $10 per share to all-time highs of $75 at the moment.
Between fiscal 2010 and 2013, Nike increased its annual revenues by a cumulative 33% to $25.3 billion. Earnings rose by a cumulative 30% to $2.5 billion. As the company retired some 8% of its shares outstanding over the time period, earnings per share growth was even more spectacular.
Back in March of this year, I last took a look at Nike’s prospects. In the meantime, shares have risen another 25%. I concluded at the time that the strong growth momentum, innovations and strong market positions would structurally boost margins and thereby earnings growth for the foreseeable future. Yet I had not envisioned such strong returns in the meantime.
The strong customer engagement, innovation in sports equipment and technological apps and devices to keep track of the performance, are all boosting customer satisfaction and Nike’s bottom line. Management sees the business stronger than ever before.
Shares have already risen some 50% year to date, boosting the valuation to 26 times last year’s earnings, which is a bit rich even for this superior global brand.
I remain on the sidelines. I am a great fan of the company, its products, but not of the current share price, or better said its valuation.”