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  • Proven Wealth Creator Delivers Again; Earnings, Sales Growth Surge

    By Mitchell Clark, B.Comm. for Profit Confidential

    In a world where genuine revenue and earnings growth is a tough thing to come by, the company with the iconic "swoosh" did so with flying colors. NIKE, Inc. (NYSE:NKE) is a business that continues to defy its maturity as a brand.

    The company posted 2014 fiscal first-quarter earnings that beat Wall Street consensus, with revenue growth coming in at a solid eight percent with no significant impact from currency translation.

    The company was able to increase its gross margin substantially and total earnings grew an impressive 33% to $780 million. Diluted earnings per share grew 37% to $0.86 a share on one percent less in weight average diluted shares outstanding.

    NIKE purchased 8.4 million shares of its own common stock in its fiscal first quarter for $526 million, and its cash position soared $2.3 billion (after a debt issuance and the sale of Cole Haan and Umbro) to $5.6 billion.

    With such strong numbers and such a solid cash position, I'm actually surprised the company didn't effect an increase to its quarterly dividends. The company raised its dividend at the end of last year, and management may do so in the next quarter; the business can certainly afford it.

    NIKE has been able to get away with price increases without affecting demand, and with strong expense control, the extra margin goes right to the bottom line.

    The company had a very successful fiscal 2012 fourth quarter, and its operational momentum continues. The stock is at an all-time record high, with a current dividend yield of just over one percent; but like most successful enterprises, the company's share price is often trading at new highs.

    This business is worthy of consideration when it pulls back on the stock market. The position really hasn't had a major period of consolidation since back around 2000. The company's latest quarter was a standout.

    In the retail landscape, brand power matters and NIKE continues to execute tremendously well. Excluding changes in currencies, the company said that global orders for its NIKE-branded footwear and apparel for delivery from September 2013 through to January 2014 is up eight percent compared to the same quarter last year. It's therefore reasonable to expect the company to post another solid quarter of revenues and earnings growth. Earnings outlooks from major Wall Street firms are very likely to improve over the coming weeks. (See "What NIKE's Earnings [To Be Released This Afternoon] Could Reveal About This Proven Wealth Creator.")

    I always follow NIKE for its financial results. I use it as a benchmark stock on consumer retail spending. While the stock is fully priced, it's earned the right to be, with such impressive growth in a still slow-growth environment.

    The only low point in NIKE's business currently is China. But this was widely expected, as company management already guided accordingly. NIKE is a solid long-term holding to consider for any equity market portfolio.

    Sep 30 7:16 AM | Link | Comment!
  • As Expectations For 3Q Earnings Season Fall, What's The Best Investment Strategy?

    Investment risk for the very near-term stock market is going up. There's been pressure on interest rates, investor sentiment was hit by the lack of tapering to quantitative easing, and finally, the third-quarter earnings outlook is mediocre at best.

    Everything related to the stock market has been exceptional this year. While earnings growth was completely and totally lackluster, with several exceptions, the main stock market indices proceeded to rise tremendously based on continued monetary expansion and the fact that there really is nowhere else for investors to go but stocks.

    Second-quarter earnings season was unimpressive, and I think it will be the same for the third-quarter reporting season. Financial results very well could be the catalyst for a major market retrenchment in October. I think that all investors need to prepare for such an eventuality. Generally speaking I do think that stocks can continue to rise in 2014; however, corporations will have to provide genuine earnings growth and top-line growth to keep valuations from pushing the envelope.

    I would say that, given current earnings and expectations for 2014, the stock market is at least slightly-if not fully-overvalued at present. With the expectation of very modest earnings growth in the third quarter and little in the way of sales growth (especially among large-cap companies), recent stock market strength has been an expansion of valuations only.

    This is why I'm so cautious near-term and why October could be a wild ride for share prices.

    It is quite likely that market leaders that did well in the first two quarters of this year will continue to do so. These are the Johnson & Johnson's (NYSE:JNJ) of the equity market universe-these are the companies that have been well bid by institutional investors. (See "Consistency, Rising Dividends Make This Benchmark A Possible Winner for Savers.")

    Read More@

    Sep 25 7:35 AM | Link | Comment!
  • How The Market's Letting The Fed Get Away With Its “Wishy Washy” Policies

    By George Leong, B.Comm. for Profit Confidential

    Analysts and investors demand clarity when a company reports or offers up guidance. But when it comes to the Federal Reserve, investors and analysts don't seem to demand the same level of clarity, even though the central bank has been what I would label "wishy washy" as far as its policies and what it offers up to the market.

    The stock market is trading (and it has been for a while) on what the Federal Reserve says about its quantitative easing program, namely its monthly bond-buying strategy.

    Yet the Federal Reserve appears to be saying one thing, only to contradict it with the next statement. This type of confusion and uncertainty is not what I want to hear. I want more certainty in order to formalize my trading and investment strategy. The cloudiness offered by the Federal Reserve doesn't help.

    Case in point: at last week's Federal Open Market Committee (FOMC) meeting, Federal Reserve Chairman Ben Bernanke, to the surprise of nearly everyone both on Wall Street and Main Street, announced that the bank had decided against tapering, despite what I see as moderate growth in the economy. Yes, the country continues to slug along, but with the second-quarter gross domestic product (NYSE:GDP) growth at 2.5% and with the Federal Reserve estimating the country will continue to expand at a rate above two percent this year and in 2014, the Federal Reserve should have begun to rein in some of its bond buying. Pundits were estimating a $10.0-billion cutback to start.

    Well, even that small cut didn't happen. Bernanke said the economy was still fragile, and the Fed didn't want to take a chance with the economic recovery, especially with the recent soft jobs market report.

    My response is that nothing is perfect and the central bank should have eased off anyway. The Bank of England decided against any new stimulus, and its GDP growth was-and is-worse that that of America.

    Bernanke needs to gather up his courage and begin to taper. Instead, he is all over the map. At the May FOMC meeting, the Federal Reserve suggested it would begin to taper this year. Now, the Federal Reserve says GDP is stalling a bit, so the question of when tapering will start is unclear.

    For the stock market, the lack of clarity from Bernanke will continue to drive uncertainty going forward, which means trading could continue to be tepid. Will it be October or December when the tapering begins? Or will it begin after Bernanke leaves the Federal Reserve in January? The fact is Bernanke appears to lack the confidence to make a tough decision.

    Next up as the head of the Federal Reserve will likely be Bernanke clone Janet Yellen, the current vice-chairman of the central bank. I guess that means more of the same.

    If I were you, I would be taking some money off the table should stocks edge higher, as the underlying fundamentals really do not support their current record-high levels.

    Sep 24 5:36 AM | Link | Comment!
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