Nike, Inc. (NKE) is probably the quintessential example of an American company that has gained a loyal following overseas, with a reputation not only for producing high-quality athletic gear but for maintaining a cool factor that spans generations.
Nike stock has shown impressive numbers the past few quarters — and if history is an indicator of things to come, you can expect the same when the company reports Q4 2015 numbers on June 25.
Here are some reasons why Nike stock should be in your portfolio.
Exclusive NBA Deal Will Help Nike Stock
Starting in 2017, Nike will be the official outfitter of the NBA and the WNBA. This means NKE will be able supply all team uniforms and warmup gear, as well as putting its logo on team jerseys. That perk increases the cachet of a brand already considered one of the strongest in athletics.
Nike already controls more than 90% of the basketball footwear market. And this deal, an eight-year contract worth over $1 billion, should only tighten its stranglehold in a market where it’s already dominant.
In addition to the NBA deal, NKE has a licensing agreement with the NFL. Since 2012, the company has been the sole supplier of NFL uniforms and other gear due to a five-year agreement that seems likely to be extended.
Then there are the numerous endorsement deals with some of the most well-known athletes on the planet. Soccer, tennis, baseball, golf — you name it, chances are Nike has a finger in that particular pie.
Nike Stock and the Trans-Pacific Partnership
Although it’s been the subject of much contention in Congress, the Trans-Pacific Partnership would be a boon for Nike stock. The company not only does a high percentage of sales overseas but has substantial business operations internationally.
TPP is basically a trade agreement that would change the way the U.S. does business with Pacific Rim countries. And although the agreement would likely increase Nike’s international sales, which are already more than 50%, that wouldn’t be the big payoff.
Most of Nike’s more than 600 factories are located in Asia. And as it stands, NKE has to pay tariffs and fees on shoes made in those foreign markets but sold in the U.S. But if and when the TPP goes into effect, those fees would be much lower — if not eliminated altogether.
Acccording to Nike, with the savings it earns from the lowering of tariffs and fees, the company would be able to reinvest in innovation and maintain its global competitiveness. It would also increase the margins NKE makes on goods sold in the U.S.
Bottom Line
Nike has established itself as the world’s premier athletic footwear and sporting apparel company, with a brand known for quality and recognized around the globe. And it’s been boasting impressive numbers.
For Q3 2015, net income rose 16% year over year, the third straight quarter Nike stock has beat analysts’ estimates by double digits. And it’s projected the Nike stock will grow 13% per year over the next five years.
Nike’s deal with the NBA and the fact that it stands to be a big winner with the TPP also bode well for the company in the years ahead. All things considered, signs point to NKE continuing to be the go-to company for sports-related apparel.
As of this writing, Will Emerson did not hold a position in any of the aforementioned securities.
