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Brean Capital Downgrades Nike to ‘Hold’

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Sep. 29 2016, Updated 6:04 p.m. ET

Price movement

Nike (NKE) has a market cap of $89.4 billion. It fell 3.8% to close at $53.25 per share on September 28, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were -3.8%, -8.9%, and -14.1%, respectively, on the same day.

NKE is now trading 5.0% below its 20-day moving average, 5.7% below its 50-day moving average, and 8.4% below its 200-day moving average.

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Related ETF and peers

The iShares Russell Top 200 Growth ETF (IWY) invests 0.98% 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 4.5% on September 28.

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

  • VFC Corporation (VFC): $23.1 billion
  • Under Armour (UA): $16.0 billion
  • Skechers USA (SKX): $3.6 billion

Nike’s rating and performance in fiscal 1Q17

Brean Capital has downgraded Nike’s rating to “hold” from “buy.” Nike reported fiscal 1Q17 revenues of $9.1 billion, which represents a rise of 8.3% compared to $8.4 billion in fiscal 1Q16. Revenues from its footwear, apparel, and equipment brands rose 6.8%, 8.9%, and 3.7%, respectively, and revenues from the global brand divisions fell 42.3% in fiscal 1Q17 compared to fiscal 1Q16.

Revenues from North America, Western Europe, Central and Eastern Europe, Greater China, and Japan rose 6.1%, 7.4%, 9.7%, 15.1%, and 36.9%, respectively. Revenues from emerging markets fell 2.2% YoY (year-over-year) in fiscal 1Q17. The company’s gross profit margin fell 4.2% YoY.

The company’s net income and EPS (earnings per share) rose to $1.3 billion and $0.73, respectively, in fiscal 1Q17 compared to $1.2 billion and $0.67, respectively, in fiscal 1Q16.

Nike’s cash and cash equivalents fell 18.1%, and its inventories rose 10.9% YoY in fiscal 1Q17. Its current ratio fell to 2.7x, and its debt-to-equity ratio rose to 0.74x in fiscal 1Q17 compared to 2.8x and 0.61x, respectively, in fiscal 1Q16.

In fiscal 1Q17, Nike repurchased 19 million shares worth ~$1.1 billion. On August 31, 2016, it scheduled the delivery of $12.3 billion in orders from September 2016 to January 2017. This figure translates to a 5% YoY rise in orders and a 7% rise on a currency-neutral basis.

Now we’ll discuss Thor Industries (THO).

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