Author Topic: Disclosure  (Read 48 times)


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« on: November 03, 2013, 10:54:04 am »
China And Margins Remain The Important Problems
Nike (NKE), the athletic footwear juggernaut, reviews their fiscal third quarter after the bell on Thursday, March twenty first, 2013, with analyst consensus expecting $6.two billion in income, and $.67 in earnings per share (EPS), for yearoveryear development of seven% in revenues and 12% in earnings per share.
Futures orders are anticipated in the 6% seven% variety
NKE's stock is up a little more than 6% yeartodate (YTD) as this is being created, underperforming the SP five hundred,cheap chanel replica, and was up roughly 7% 8% in 2012. The inventory had a great year in 2011, a yr when the SP 500 was up just two%, returning more than 13%.
What has kept us out of the stock has been valuation, because every time we've carried out an earnings preview of NKE, we've discovered a twenty(X) 25 cashflow valuation on the inventory, which is not untypical of an legendary brand name, but is still too salty a valuation at which to originate a place.
Nike has seen margin stress from the finish of fiscal 2010 (or roughly Might, 2010) when the gross and working margins peaked at forty seven% and 14% respectively, but have fallen to 42.five% and respectively because then.
Nike's futures orders growth, which is products scheduled for shipping and delivery for the subsequent quarter has also trended lower, per the subsequent data:Nike's historical and expected China income growth this autumn '14 (est)+six.three%
q3 '14 (est)+five.4%q2 '14 (est)+three.eight%q1 '14 (est).04%q4 '13 (est)6.5%q3 '13 (est) '1312%q1 '13+six.8%q4 '12+14.three%q3 '12+20.five%q2 '12+28.five%q1 '12+eight.six%At its present valuation,chanel outlet online, NKE is trading at 21, eighteen and 16 ahead earnings for expected EPS growth of twelve%, 14% and 13%.
The cashflow valuation is eighteen 4quarter trailing money flow, and 24 freecashflow, both of which exclude the stability sheet money from the marketplace cap.
The 1 unambiguous good about Nike is that the company is a prodigious freecashflow generator. With a freecashflow yield of eight% (calculated as freecashflow as a proportion of marketplace cap), administration has been returning a great deal of money to shareholders in the type of dividends and the share repurchase plan.
Because we track "4quarter trailing" freecashflow, against money returned to shareholders, Nike is exceeding their freecashflow with the dividend and the share repurchase, although just modestly so. (Not a big offer in our viewpoint).
Simply because we manage consumer cash for a residing, although we love the brand, and the management, we prefer to wait for a much more appealing valuation to buy a bigger place in the stock. A trade beneath $fifty would begin to get us interested, and a trade near $40 we think would be a tablepounding purchase, but legendary and worldclass brand names often by no means trade cheaply.
Right here are our two most current Nike earnings previews one from Sept. 2012 and then December, 2012. The valuation has enhanced on Nike,replica chanel bags, but is nonetheless not yet, "cheap enough" for our preferences. Our internal design values NKE at $fifty seven, and Morningstar has a fair value on the stock at $50, so where it is buying and selling these days, Nike is probably regarded as fairly valued.
We stay lengthy one longterm position in NKE bought in Might, 2004 at $seventeen per share.
Source: Nike Earnings Preview: China And Margins Stay The Important Issues Valuation Improving
Disclosure: I am long NKE. I wrote this post myself, and it expresses my personal thoughts. I am not receiving compensation for it (other than from Looking for Alpha). I have no company relationship with any company whose inventory is talked about in this post. (Much more.)
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