Nike Inc: This Is Why Traders Are Going Crazy Over NKE Stock
NKE Stock Hammered After Earnings
Shares of Nike Inc (NYSE:NKE) stock declined two percent in after-hours trading following the company’s fiscal 2017 first quarter earnings report.
This came despite the fact that the athletic apparel giant beat the analyst forecasts on both revenue and earnings. NKE stock is among the Dow’s worst-performers over the start of 2016, as Nike shares have declined 12% year-to-date.
Nike investors must be frustrated with the stock’s poor returns this year, because the company itself is doing relatively well. Nike posted $9.0 billion of revenue for the quarter, up 7.7% year over year. (Source: NIKE, INC REPORTS FISCAL 2017 FIRST QUARTER RESULTS, Nike Inc, September 27, 2016.)
Earnings per share clocked in at $0.73 per share, which easily beat expectations of $0.56 per share.
The reason for NKE stock declining on such strong results is that the company’s future orders disappointed investors. Nike Inc expects worldwide orders for September 2016 through January 2017 will rise seven percent after excluding the impact of foreign exchange, slightly below expectations of eight percent. This would be the lowest futures orders growth rate in the past year. (Source: Nike orders miss estimates as competition heats up, Reuters, September 27, 2016.)
Nike has endured a difficult climate in 2016, due to the strong U.S. dollar and intensifying competition in the athletic apparel space. Moreover, Nike stock has performed poorly, and has notably lagged the S&P 500. This is likely discouraging to investors, but there is still reason to hold NKE stock.
The company is still growing at excellent rates. Nike stock has declined this year, but that could have more to do with its massive run over the past few years. For example, NKE stock is still up 150% in the past five years.
Nike Inc stock is experiencing compression of its valuation multiple, but the company is still doing well. The stock trades for 20 times forward earnings estimates, which is a reasonable valuation for a growth company like Nike. The recent decline in NKE stock should be on investors’ watchlists.