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B. Riley Downgrades Nike to ‘Neutral’

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Price movement

Nike (NKE) has a market cap of $99.4 billion. It fell by 0.41% to close at $59.0 per share on August 26, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were 0.17%, 6.4%, and -5.1%, respectively, on the same day.

NKE is trading 3.9% above its 20-day moving average, 5.0% above its 50-day moving average, and 0.24% below its 200-day moving average.

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Related ETF and peers

The iShares Russell Top 200 Growth ETF (IWY) invests 1.2% of its holdings in Nike. The ETF tracks an index of US large-cap growth stocks selected from 200 of the largest US companies by market cap. The YTD price movement of IWY was 4.4% on August 26.

The market caps of Nike’s competitors are as follows:

  • VF Corporation (VFC): $26.6 billion
  • Under Armour (UA): $17.5 billion
  • Skechers USA (SKX): $3.9 billion

Nike’s rating and fiscal 4Q16 performance

B. Riley & Company has downgraded Nike’s rating to “neutral” from “buy.” TheStreet Ratings rated the stock as a “buy” with a score of “B+.”

Nike reported fiscal 4Q16 revenues of $8.2 billion—a rise of 5.1% from $7.8 billion in fiscal 4Q15. Revenues of its footwear and apparel brands rose 6.3% and 3.9%, respectively. Revenues from equipment fell by 5.8% between fiscal 4Q15 and fiscal 4Q16. Revenues from Western Europe, Greater China, and Japan rose by 18.5%, 18.1%, and 21.7%, respectively. Revenues from Central and Eastern Europe and emerging markets fell by 4.2% and 6.6%, respectively, between fiscal 4Q15 and fiscal 4Q16.

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Nike’s net income fell to $846.0 million in fiscal 4Q16, as compared to $865.0 million in fiscal 4Q15. It reported EPS (earnings per share) of $0.49 for fiscal 4Q15 and fiscal 4Q16. In fiscal 4Q16, the company repurchased a total of 9.0 million shares worth ~$540 million under the share repurchase program of $12 billion approved by the board of directors in November 2015.

Fiscal 2016 results

In fiscal 2016, Nike reported revenue of $32.4 billion—a rise of 5.9% year-over-year. The company’s gross profit margin rose by 0.43% in fiscal 2016. Its net income and EPS rose to $3.8 billion and $2.2, respectively, in fiscal 2016, as compared to $3.3 billion and $1.85, respectively, in fiscal 2015.

Nike’s cash and cash equivalents fell by 18.5%, and its inventories rose by 11.6% in fiscal 2016. Its current ratio and debt-to-equity ratio rose to 2.8x and 0.75x, respectively, in fiscal 2016, as compared to 2.5x and 0.7x in fiscal 2015. In fiscal 2016, the company repurchased a total of 55.4 million shares worth ~$3.2 billion at an average price of $58.44 under the old and new share repurchase programs of $8 billion and $12 billion, respectively.

As of May 31, 2016, Nike scheduled the delivery of $14.9 billion in orders from June to November 2016. This translates to a rise of 8% in orders from the previous year and a rise of 11% on a currency-neutral basis.

Quarterly dividend

Nike declared a quarterly cash dividend of $0.16 per share on its Class A and Class B common stock. The dividend will be paid on October 3, 2016, to shareholders of record at the close of business on September 6, 2016.

In the next part, we’ll look at VF Corporation.

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