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Nike (NYSE:NKE), the iconic brand and athletic footwear and apparel giant, reports fiscal 2nd quarter, 2013, financial results after the close Thursday night, December 20th.

Analyst consensus (per ThomsonReuters) is calling for $1.00 in earnings per share on $5.98 billion in revenues for expected flat earnings year-over-year on 5% revenue growth.

While we have not seen or heard of a Q2 futures estimate, we have seen a couple of analysts turn conservative on US athletic footwear futures, which are now expected in the 10% range, down from 13% last quarter.

The US footwear business, which has been a source of strength for the last year for Nike, now looks like it is slowing, or at least growth is more tempered.

The following two articles we wrote for Nike's May quarter preview, and then the August quarter earnings preview, and to be perfectly frank, little has changed (here and here).

The three main problems we see for Nike right now:

1.) Despite some improvement in the Chinese economy, the China market is thought to be "over-inventoried" from what we read. China's futures orders were down 6% in fiscal Q1 2013, and still deteriorating;

2.) Margins - Nike's gross margin peaked at over 47% in mid 2010 and has now slid to 43.5% as of last quarter. There is also pressure on the operating and met margin.

3.) As referenced above, some of the analyst chatter has turned cautious on Nike's US athletic footwear business. The US is roughly 40% - 45% of Nike's EBIT (Earnings before Interest and Taxes) still, so what was a source of strength, for the footwear giant could now be slowing.

But here is the conundrum not just with Nike, but all world-class brands: while Nike's valuation looks very rich, the stock never seems to ever get even remotely cheap.

At $98 per share, Nike is trading at 19(x) cash-flow, and 25(x) free-cash-flow and is $3 higher than when the company reported financial results in May.

Even "ex-cash" Nike is still trading at 17(x) 4-quarter trailing cash-flow and 23(x) free-cash-flow.

Earnings and revenue estimates have been revised lower over the last 6 quarters with "analyst consensus" now looking for 5% - 7% revenue growth over the next three years, generating 11% - 13% earnings per share growth.

At $98 per share, Nike is trading at an 18(x) - 19(x) multiple for 11% expected growth in fiscal 2013.

Nike recently announced an $8 billion share repurchase program in mid September, which while sounding impressive will take awhile to execute as their combined dividend and share repo programs are now 150% of Nike's free-cash-flow. (Nike has little long-term debt so I thought they would be a candidate for a big year-end divvy with Phil Knight's ownership position - guess not.)

After 2013, and what surely looks to be a higher tax rate for dividends, we do think companies like Nike that return more capital via share repo's than dividends, might be "valuation-advantaged" over the big dividend payers. That is just speculation on my part for now.

Bottom-line: We love the brand but are still waiting on lower prices to take a bigger position in the stock, and spread it throughout accounts. A breakdown into the mid $80s would be great, and we would back up the truck at $80 and lower. (We maintain one position in Nike from May '04 with a cost basis of $34. Long-term low turnover account with low tolerance for taxes.)

With a world-class brand like Nike, the valuation never looks truly cheap, but given the slowing fundamentals, and the iffy technicals, we continue to wait on lower prices.

Source: Nike Earnings Preview: Waiting On The Iconic Brand To Sink Into Valuation