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Is Nike a Winner? (NKE)

July 14, 2011 | About:
balaji.nages

balaji.nages

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About the Company

NIKE (NKE) is one of the world's most widely recognized brands. It sells athletic footwear and athletic apparel in over 170 countries around the world.

NIKE's footwear is manufactured outside the US in the factories of China, Vietnam, Indonesia and Thailand.The main raw materials used in NIKE footwear are rubber, plastic compounds and foam cushioning materials, nylon, leather, canvas, and polyurethane films used for cushioning components.

NIKE brand apparel is also manufactured almost entirely outside of the US in 34 different countries. The main materials used in NIKE apparel are natural and synthetic fabrics and threads, plastic and metal hardware, and water and heat resistant fabrics.

Management

Mr. Philip H. Knight has been chairman of the board of NIKE Inc. He has been director since 1968. His compensation is $3,456,450 per year.

Mr. Mark G. Parker has been president, chief executive officer and director of NIKE Inc. since Jan. 23, 2006. His compensation is $13,118,800 per year.

Mr. Donald W. Blair is chief financial officer and vice president of NIKE Inc. He joined NIKE in November 1999. His compensation is $4,837,080 per year.

Strengths

  1. A very professionally competitive company
  2. Has ownership of no physical factories so production can be moved to a more cost effective location when necessary
  3. Very well branded among consumers
  4. Strong sense of marketing campaign by sponsoring top athletes.
  5. Offer their products worldwide


Weaknesses

  1. The income of the business is still heavily dependent upon its share of the footwear market. This may leave it vulnerable if for any reason its market share erodes.
  2. It has high prices compared to its competitors.


Opportunities

  1. Expansion in the emerging markets such as China and India have a new richer generation of consumers.
  2. There is also the opportunity to develop products such as sport wear, sunglasses and jewelery. Such high value items do tend to have associated with them high profits.


Threats

  1. Operating business internationally opens them to the possibilities of currency value fluctuations that can lead to losses.
  2. The market for sports shoes and garments is very competitive. Competitors are becoming more aggressive and creating high quality products
  3. Retail sector is becoming price competitive. This ultimately means that consumers are shopping around for a better deal.


RECENT NEWS

On June 29, 2011, Nike reported fourth-quarter earnings increased 14% to $594 million, or $1.24 per share from $522 million a year earlier, beating most analyst expectations. Net sales rose to $5.77 billion from $5.08 billion. Analysts had expected earnings of $1.77 per share on revenue of $5.53 billion on average

10-Year Summary

YEAR SALES % CHANGE
2011 20,860.00 9.7%
2010 19,014.00 -0.85%
2009 19,176.10 2.95%
2008 18,627.00 14.09%
2007 16,325.90 9.17%
2006 14,954.90 8.84%
2005 13,739.70 12.13%
2004 12,253.10 14.55%
2003 10,697.00 8.13%
2002 9,893.00 4.26%


SALES.bmp

NIKE's sales have been increasing for the past 10 years, except in 2010 which decreased 0.85% from 2009.

Recently the company increased its fiscal 2015 revenue target to a new range of $28-30 billion, up from its previous target of $27 billion announced in May 2010. Additionally, the company reaffirmed its goal of generating $12 billion of cumulative free cash flow from operations from fiscal 2011 through fiscal 2015. Both goals extend NIKE Inc.’s long-term financial model of high single-digit revenue growth, mid-teens earnings per share growth and expanding returns on capital

YEAR EPS FCF PER SHARE
10-May 3.86 5.85
9-May 3.03 2.71
8-May 3.74 3.02
7-May 2.93 3.18
6-May 2.64 2.61
5-May 2.24 2.53
4-May 1.75 2.49
3-May 1.38 1.41
2-May 1.23 1.53
1-May 1.08 0.65




EPS.bmp


NIKE's free cash flow per share increased every year except 2009. It has the ability to pay debt, pay dividends, buy back stock and facilitate the growth of business.

YEAR SHARES OUT STANDING
10-May 484.0 Mil
9-May 485.5 Mil
8-May 491.1 Mil
7-May 501.7 Mil
6-May 512.0 Mil
5-May 522.2 Mil
4-May 526.2 Mil
3-May 527.2 Mil
2-May 532.2 Mil
1-May 537.2 Mil




When a company is buying up its own shares, it says management believes that the market has gone too far in discounting the shares — a positive sign.

5% Ownership

INSTITUTION NAME SHS HELD %OUT RPT DATE
Oak Hill Strategic Partners 20,889,252 5.4 3/31/2011


Analysts' Recommendations

Jul 5, 2011: Outperform with price target $97 by FBR Capital

Mar 18, 2011: Buy with price target $96 by McAdams Wright Ragen

Mar 18, 2011: upgraded to Buy with price target $98 by Stifel Nicolaus

Conclusion

This is not a recommendation to buy or sell shares of any securities discussed in this article. Please do your own research work.

About the author:

balaji.nages
I am Balaji completed my MBA in 2006,currently am working in a research company as a Research Associate

Rating: 3.1/5 (14 votes)

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