Nike Stock Still A Buy After CRUSHING Earnings (NKE)

You can't deny Nike's strong showing in the most recent quarter

Nike (NKE) stock is soaring on Friday after a blowout fiscal fourth-quarter that saw the apparel giant cruise past both revenue and earnings expectations. It’s familiar news for Nike shareholders, who have seen NKE stock absolutely demolish the wider market over the last year.

Nike NYSE:NKE stockNike shares were up a remarkable 40% in the last year before yesterday’s earnings beat, besting the S&P 500 by a full 33 percentage points.

The exemplary Nike earnings assuaged fears that the industry’s rising star, Under Armour (UA), would eat into results at the iconic apparel company.

Clearly we haven’t reached that point yet for NKE stock, which is still a strong buy after Thursday’s strong showing.

What’s Not to Like?

Revenue ticked up 4.8% in the period, growing to $7.78 billion and easily surpassing calls for $7.69 billion. But Nike earnings were the real MVP on Thursday, with earnings per share coming in at 98 cents per share, absolutely demolishing calls for 83 cents per share.

NKE stock was up as much as 4% in early trading on Friday on the news.

And, when you strip out the harmful effects from a stronger U.S. dollar, NKE’s quarter looks even better! Revenue would have been up 13% had the dollar not been so robust in relation to foreign currencies. With the majority of the company’s revenue coming from overseas, a stronger dollar means overseas sales have a smaller impact when they’re converted back into greenbacks.

The fourth quarter also saw higher gross margins, largely spurred by an encouraging growth in direct-to-consumer online sales, a segment which should continue to perform well and grow. You can even customize your own kicks on the Nike website (a feature that I myself become totally engrossed in every few months). NKE gross margins rose to 46.2% from 45.6% a year earlier.

And of course, it’s tough to turn in a stellar earnings beat without spending less money than expected. NKE reduced its “demand creation expense” by 6.5% to $819 million in the quarter, though the decrease was largely due to elevated spending last year due to the World Cup.

While I continue to believe that UA stock is a buy — especially considering the remarkable success of some of its young, high-profile athletes like Stephen Curry (NBA MVP and NBA champion) and Jordan Spieth  (21-year-old winner of both the U.S. Open and Masters) — the stock is far pricier than NKE.

In fact, by the most traditional metric of valuation, UA stock is about 3 times as pricey as NKE; UA trades for a P/E of 92 to NKE’s 31 P/E. Considering that NKE also rewards investors with a modest 1% dividend, I consider NKE stock a strong buy after its impressive fourth-quarter earnings results.

As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/06/nike-stock-still-a-buy-after-crushing-earnings-nke/.

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