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ETFs to Watch as NIKE Sets Robust 2020 Sales Target

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Fiscal 2015 has been a successful year for NIKE, Inc. ( NKE ) and the fiscal 2020 sales target of the company has set the bar a lot higher. The world's largest sports apparel manufacturer projected its revenues to reach the $50 billion mark by the end of this decade. This implies a compounded annual growth rate ("CAGR") of 10%, much higher than the expected 3.4% CAGR of the retail sporting goods industry over 2015-2020.

NIKE delivered top-line growth of 10% in both fiscal 2014 and fiscal 2015. It ended fiscal 2015 with revenues of $30.6 billion, way beyond the revenues of $7.6 billion recorded by the next biggest sports apparel manufacturer, Ralph Lauren Corporation ( RL ).

And how will the ambitious sales target for fiscal 2020 be achieved? The company envisions the developed markets of Western Europe, North America and Japan to witness average annual growth at a high single-digit rate, with North American sales reaching the $20 billion mark by fiscal 2020 (read: Retail ETFs Hit Hard by Soft September Sales ).

When most retailers are concerned about sluggish growth in China and other emerging markets, NIKE anticipates Greater China, the Emerging Markets and Central & Eastern Europe to grow at a low double-digit average annual rate in the next five years. Notably, the company witnessed impressive sales growth in China over the three months ended August 2015 backed by strong demand for sports goods.

NIKE has been receiving tremendous support from its eCommerce and women's category businesses. Management has projected eCommerce sales to increase to $7 billion over the next five years while women's category sales are expected to touch the $11 billion revenue mark by fiscal 2020.

NIKE has been witnessing rising estimate revisions after its promising fiscal 2016 first quarter results released at the end of last month. The company continued its long streak of earnings beats in the quarter with earnings per share of $1.34 surging nearly 23% year over year and surpassing the Zacks Consensus Estimate of $1.19. Net sales rose 5.4% to $8,414 million and beat the Zacks Consensus Estimate of $8,215.9 million.

Nearly all the analysts upgraded their earnings estimates for fiscal 2016 in the last one month. Earnings per share for fiscal 2016 have been revised upward by 2.4% to $4.27 in the same timeframe. NIKE currently boasts a Zacks Rank #2 (Buy) with a Momentum Score of 'A'. Its stock price surged 35.7% so far this year (as of October 16, 2015).

Amid this robust growth outlook and bullish price trend, it seems worthwhile to invest in NIKE via the ETF or basket approach. This is because the ETF route helps investors to mitigate a company's average performance with stellar results from others. Below we highlight three top ETFs, which are heavily exposed to this sports goods giant.

RevenueShares NavellierOverall A-100 ETF ( RWV )

This ETF tracks the RevenueShares Navellier Overall A-100 Index, which ranks the securities by top line instead of market capitalization. The fund holds 100 stocks in its basket with NIKE occupying the third spot with 6.91% of assets. It has amassed more than $7 million in assets and trades in a thin volume of 700 shares per day. RWV is expensive with 0.60% in expense ratio. It gained about 1% so far this year.

SPDR Dow Jones Industrial Average ETF Trust ( DIA )

This popular ETF follows the oldest continuing U.S. market index, Dow Jones Industrial Average, measuring the performance of 30 blue-chip U.S. stocks. NIKE holds the fifth position in the fund with allocation of 5.02%. The fund has garnered about $11.5 billion in assets and trades in a solid volume of more than 6 million shares per day. It is one of the cheapest funds charging 17 bps in fees per year from investors. DIA was down 3.4% in the year-to-date timeframe and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: 3 Top-Ranked Large-cap Value ETFs for an Uncertain Market ).

PowerShares DWA Consumer Cyclicals Momentum ( PEZ )

This ETF tracks the Dynamic Consumer Discretionary Sector Intellidex Index, providing exposure to companies that are showing relative strength. The fund holds 38 stocks where NIKE holds the second position with 4.19% allocation. It has gathered about $234 million in assets and trades in an average volume of nearly 50,000 shares per day. The fund charges higher annual fees of 60 bps from investors. It was up 4.6% in the year-to-date period and sports a Zacks ETF Rank #1 (Strong Buy) with a High risk outlook (read: Top Ranked Retail ETFs Wait for a Holiday Season Rally ).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days . Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

NIKE INC-B (NKE): Free Stock Analysis Report

RALPH LAUREN CP (RL): Free Stock Analysis Report

RENENU-NO A-100 (RWV): ETF Research Reports

SPDR-DJ IND AVG (DIA): ETF Research Reports

PWRSH-DW CON CY (PEZ): ETF Research Reports

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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