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How Does Citigroup View Nike?

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Price movement

Nike (NKE) has a market cap of $86.6 billion. It fell 0.04% to close at $52.12 per share on October 5, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -2.1%, -9.2%, and -15.9%, respectively, on the same day.

NKE is trading 4.8% below its 20-day moving average, 7.0% below its 50-day moving average, and 9.9% 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 capitalization. The YTD price movement of IWY was 3.8% on October 5.

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

  • VF Corporation (VFC) — $22.8 billion
  • Under Armour (UA) —$15.6 billion
  • Skechers USA (SKX) — $3.5 billion

Nike’s rating

Citigroup has rated Nike as a “buy.” According to TheStreet, “Citi said that the Beaverton, OR-based athletic retailer’s ‘long-term global secular growth story remains intact,’ and the firm has more confidence now in Nike’s fiscal 2017 year than prior to its fiscal first quarter results last week.”

It also added, “The growing confidence is due to Nike’s reaccelerating North American sales, continued ‘solid’ sales in international markets and futures and investments in supply chains and products, the firm said.”

Performance of Nike in fiscal 1Q17

Nike reported fiscal 1Q17 revenue of $9.1 billion, a rise of 8.3% from $8.4 billion in fiscal 1Q16. Revenues from its footwear, apparel, and equipment brands rose 6.8%, 8.9%, and 3.7%, respectively, and revenue from its global brand division fell 42.3% between fiscal 1Q16 and fiscal 1Q17.

Nike’s 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, in fiscal 1Q17. Its revenue from emerging markets fell 2.2% YoY (year-over-year) in fiscal 1Q17. The company’s gross profit margin fell 4.2% YoY.

Nike’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.

Its 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 its current and debt-to-equity ratios of 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 worth of orders between September 2016 and January 2017. This figure translates to a 5% YoY rise in orders and a 7% rise on a currency-neutral basis.

Next, we’ll take a look at Constellation Brands (STZ).

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