Nike in 2015: An Earnings Smash, a Widening Moat, and Record Highs



Nike reports financial results for fiscal 2015 and 4Q15

Nike (NKE) is competing with itself. The company released financial results for fiscal 2015 and 4Q15[1. Year and quarter ending May 31, 2015] after the market close on June 25. Both revenue and earnings were way ahead of market expectations. The world’s largest athletic gear company’s performance was strong across categories, segments, and geographies.

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Nike’s results beat market expectations

The company’s earnings beat consensus Wall Street analysts’ estimates by a wide margin. Adjusted earnings came in at $0.98 in 4Q15, an increase of 26% year-over-year. The company beat estimates of $0.83 by over 17%. This is the 12th straight quarter of earnings beats by the company.

Nike’s results came ahead of consensus Wall Street analysts’ estimates on revenue as well. The company’s revenue rose by 4.8% to $7.8 billion in 4Q15. Markets had projected sales at $7.7 billon. For the full year, revenue came in at $30.6 billion, a 10% year-over-year increase.

A widening moat?

Despite being around for over 50 years, Nike’s performance isn’t letting up. The difference in annual revenue between Nike and Under Armour (UA), Nike’s nearest US competitor, has widened, from about $25.5 billion in fiscal 2014 to $27.5 billion in fiscal 2015[2. Fiscal year for Under Armour ends December 31].

For Adidas (ADDYY), the world’s number two sports gear company, the difference is even greater. Adidas increased sales by $0.5 billion last year. In contrast, Nike’s revenue increased by $2.8 billion.

Nike also increased its return on invested capital (or ROIC) year-over-year. The company reported a ROIC of 28.1% in fiscal 2015, compared to 24.5% the previous year.

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Performance drivers

In this series, we’ll analyze Nike’s performance in fiscal 2015 and its drivers. You’ll also read about why Nike and some of its peers are trading at or near all-time highs.

Top consumer discretionary stock

NKE and UA together constitute ~3.6% of the portfolio holdings of the Consumer Discretionary Select Sector SPDR Fund (XLY) and ~0.5% in the holdings of the SPDR S&P 500 ETF (SPY). NKE is among the top ten holdings in XLY with a ~3% weight.

For a detailed overview of the company’s businesses, read Traditionally innovative: A must-know investor’s guide to Nike.


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