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Category: Stock Market and Nike Inc
Date: 22 December 2019 Stock Price: $99.96 We take a look at the 2nd quarter 2020 earnings report of Nike Inc. the sporting apparel and accessories group. Has our stock target for them improved since our 1st quarter 2020 stock valuation of Nike?
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About Nike Inc.
NIKE, Inc., based near Beaverton, Oregon, is the world’s leading designer, marketer and distributor of authentic athletic footwear, apparel, equipment and accessories for a wide variety of sports and fitness activities. Wholly-owned NIKE, Inc. subsidiary brands include Converse, which designs, markets and distributes athletic lifestyle footwear, apparel and accessories; and Hurley, which designs, markets and distributes surf and youth lifestyle footwear, apparel and accessories
Overview of Nike's 2nd quarter 2020 earnings report
Data below refers to the latest quarter unless specified otherwise:
Nike Brand Revenues:
- Revenues $ 10.326 billion (up 10% from $ 9.374 billion for the same quarter of the previous year)
- Cost of sales: $5.782 billion (up 10% from $5.269 billion for the same quarter of the previous year)
- Gross profit: $4.544 billion (up 11% from 4.105 billion for the same quarter of the previous year)
- Net income: $1.115 billion (up 32% from $847 million for the same quarter of the previous year)
- Diluted earnings per share: $0.70 (up from $ 0.52 for the same quarter of the previous year)
- PE ratio of Nike Inc: 35.7
- Diluted number of shares outstanding: 1.594 billion (down from 1.620 billion for the same quarter of the previous year)
- Dividends declared per common share: $ 0.245 (up 10% from $ 0.20 for the same quarter of the previous year)
- Dividend yield of Nike: 0.98%
- Cash and equivalents: $3.070 billion
- Cash and equivalents per share: $1.92
- Cash and equivalents makes up 1.9% of Nike Inc's market capital
- Cash and equivalents makes up 11.54% of Nike Inc's total assets
- Accounts receivable: $4.792 billion
- Accounts receivable (money owed to the group) makes up 18% of Nike Ic's total assets
- Inventories: $6.199 billion
- Inventories makes up 23.3% of Nike Inc's total assets
- Shareholders’ equity in Nike Inc: $9.351 billion
- Shareholders equity per share: $5.86
- Nike Inc is trading at 17.1 times its stockholders equity. This is outside the usual range of between 2 and 4 times what most companies tend to trade at
Nike Brand Revenues:
- Footwear $ 6.206 billion (up 12% from the same quarter of previous year)
- Apparel $3.287 billion (up 8% from the same quarter of previous year)
- Equipment: $341 million (up 6% from the same quarter of previous year)
- Total: $9.844 billion (up 10% from the same quarter of previous year)
Nike's management commentary on their 2nd quarter 2020 earnings
BEAVERTON, Ore., Dec. 19, 2019 – NIKE, Inc. (NYSE:NKE) today reported fiscal 2020 financial results for its second quarter ended November 30, 2019. Revenue increased to $10.3 billion in the second quarter, up 10 percent on a reported basis and up 13 percent on a currency-neutral basis*, driven by strong growth across all geographies. “In Q2, NIKE has proven again that innovation is our greatest competitive edge – turning athlete insights into breakthrough product and digital services, as we offer more choice to more consumers at an accelerated pace,” said Mark Parker, Chairman, President and CEO, NIKE, Inc. “Our entire NIKE team is fueling our current momentum, and I’ve never been more optimistic about the future of this company.
Diluted earnings per share for the quarter was $0.70, an increase of 35 percent driven primarily by strong revenue growth, gross margin expansion, selling and administrative expense leverage, a lower tax rate and a lower average share count. “NIKE delivered another strong quarter of accelerating, high-quality growth, driven by strategic and targeted investment in our digital transformation,” said Andy Campion, Executive Vice President and Chief Financial Officer, NIKE, Inc. “As we deliver a relentless flow of innovation and scale NIKE’s digital advantage, we are positioned for even greater competitive separation and long-term shareholder value creation.
Share Repurchases
During the second quarter, NIKE, Inc. repurchased 10.1 million shares for approximately $922 million as part of the four-year, $15 billion program approved by the Board of Directors in June 2018. As of November 30, 2019, a total of 33.6 million shares had been repurchased under this program for approximately $2.9 billion.
Share Repurchases
During the second quarter, NIKE, Inc. repurchased 10.1 million shares for approximately $922 million as part of the four-year, $15 billion program approved by the Board of Directors in June 2018. As of November 30, 2019, a total of 33.6 million shares had been repurchased under this program for approximately $2.9 billion.
Nike Inc (NYSE: NKE) stock price history
The image below, obtained from Google, shows the stock price history of Nike Inc (NYSE: NKE) for the last 5 years. And its been a very good time for Nike Inc stockholders. 5 years ago it was trading at $48.40 and its currently trading at around $99.96 a share. That's a strong return of 106.5% over the last 5 years. The stock of Nike is also trading at a lot closer to its 52 weeks high of $101.40 than it is to its 52 week low of $66.53 , which to us is a clear sign that the short term momentum and sentiment towards Nike Inc. stock is very positive.
Recent coverage of Nike Inc
The extract below covers the latest earnings report from Nike as obtained from TheStreet.com
Nike (NKE) - Get Report posted earnings of 70 cents a share vs. 52 cents in the year-ago quarter and well above analysts’ forecasts of 58 cents a share. Sales rose 10% to $10.32 billion against analysts’ estimates of $10.09 billion. Over the past five years, Nike has reported double-digit sales growth in China, but there were concerns that trade tensions between the U.S. and China would weigh on the company’s performance.
Nike reported 20% revenue growth in China to $1.8 billion, led by $1.2 billion in footwear. North America and Europe remained the company’s biggest markets, accounting for $3.98 billion and $2.53 billion of sales in the quarter, respectively. Nike’s revenue from North America, however, missed Wall Street's expectations of $4 billion.
"Stock ran up a lot. But this stock is...it's a good opportunity to buy. Wait til the end of the day and the seller's going to try and make themselves look right. The brokers will be trying to get an average price that at the end of the day then they mark it down so that maybe they sell it at $99 and knock it down to $98 and they'll be able to say to the client, 'Hey listen, I got you better than the average," said Cramer.
Read the full article here
Nike (NKE) - Get Report posted earnings of 70 cents a share vs. 52 cents in the year-ago quarter and well above analysts’ forecasts of 58 cents a share. Sales rose 10% to $10.32 billion against analysts’ estimates of $10.09 billion. Over the past five years, Nike has reported double-digit sales growth in China, but there were concerns that trade tensions between the U.S. and China would weigh on the company’s performance.
Nike reported 20% revenue growth in China to $1.8 billion, led by $1.2 billion in footwear. North America and Europe remained the company’s biggest markets, accounting for $3.98 billion and $2.53 billion of sales in the quarter, respectively. Nike’s revenue from North America, however, missed Wall Street's expectations of $4 billion.
"Stock ran up a lot. But this stock is...it's a good opportunity to buy. Wait til the end of the day and the seller's going to try and make themselves look right. The brokers will be trying to get an average price that at the end of the day then they mark it down so that maybe they sell it at $99 and knock it down to $98 and they'll be able to say to the client, 'Hey listen, I got you better than the average," said Cramer.
Read the full article here
Nike Inc's (NYSE: NKE) stock valuation
So what do we value one of the worlds biggest clothing and apparel brands stock at following their latest earnings report? Based on Nike's latest earnings report for the 2nd quarter of their 2020 fiscal year what is our target price (full value price) of Nike Inc. stock?
Based on their latest earnings report our valuation models provides a target price (full value price) for Nike Inc at $67.20 a stock. We therefore believe Nike Inc stock is currently overvalued and we would not recommend long term fundamental and value investors buy into the stock at its current price. We usually suggest looking to buy at least 10% below our target price which in this case is $67.20. We therefore believe a good entry point into the stock of Nike Inc stock is at $60.50 or below.
We expect the stock of Nike to pull back from current levels to levels closer to our target price (full value price) in coming weeks and months
Based on their latest earnings report our valuation models provides a target price (full value price) for Nike Inc at $67.20 a stock. We therefore believe Nike Inc stock is currently overvalued and we would not recommend long term fundamental and value investors buy into the stock at its current price. We usually suggest looking to buy at least 10% below our target price which in this case is $67.20. We therefore believe a good entry point into the stock of Nike Inc stock is at $60.50 or below.
We expect the stock of Nike to pull back from current levels to levels closer to our target price (full value price) in coming weeks and months
Next earnings release of Nike Inc
It is expected that Nike Inc will release their 3rd quarter 2020 earnings report in middle March 2020