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Nike Back On Growth Track, Offers Moderate Dividend

By: Investor's Business Daily
Posted: 4/4/2013 5:45:00 PM
Referenced Stocks: NKE

Nike ( NKE ) endured declines in quarterly earnings last year, but it's now back on a growth track.

The sports apparel giant delivered a 20% gain in EPS for its fiscal third quarter. That's up from a 12% increase in Q2 and a nice comeback from declines of 5% to 9% in the two prior periods.

On an annual basis, analysts expect Nike to boost EPS by 11% in the current fiscal year ending in May. This would give the Beaverton, Ore., firm its 15th straight year with an EPS gain.

Given those steady profit results, it's no surprise that Nike can claim three-year and five-year EPS Stability Factors of 3, near the best-possible grade of 0. That consistency should hearten investors who count on Nike's dividend, which provides an annual yield of 1.4%.

Analysts at Credit Suisse praised Nike's Q3 report, which came out March 21 after the market's close. They wrote that Nike looks to be returning to its target of achieving high single-digit top-line growth and teens EPS growth.

Over the past two quarters, Nike has seen an increase in the number of U.S. mutual and hedge funds that own its shares, though the total stake eased.

On the downside, Nike's industry group -- Apparel-Shoes & Related Manufacturing -- has ranked in the middle of the pack lately among IBD's 197 groups. IBD-style investors generally should focus on the top 20 or 40 groups.

In terms of chart action, Nike hit an all-time high March 22 after its Q3 report and remains near that level. During that session, it cleared a nearly yearlong cup-with-handle pattern with a buy point at 56. Volume was 395% above average. The stock has been trading near the upper limit of a buying range established by that 56 entry.