Nike Gains and Leaves Room for More

Nike's (NYSE: NKE  ) outperformance has been noted by all at this point, yet the company continues to deliver beyond expectations and to prove that, while a mature company, it is finding growth and record demand for the iconic swoosh. On Thursday, the company showed a bottom line that shot up 38% on the back of widespread price increases and growth in nearly every segment. Though Europe and China have weighed on many multinational companies, smart inventory management and sharp merchandising practices at Nike are keeping the damage to a minimum. Of course, after a two-year run of more than 50% in capital appreciation and a seemingly rich forward P/E, the question is whether this brand king can keep running forward.

Crushing it 
Hauling in $780 million, or $0.84 per share, in its fiscal first quarter, Nike shot up well over last year's $0.63 per share and far, far ahead of analyst expectations of $0.78 per share. Though the dollar was strong and labor costs increased, the company was able to charge more for its items and access materials for less. Every segment saw positive growth with the exception of golf.

Nike has been a busy sporting goods conglomerate, selling off its less profitable lines and capitalizing on its core brands. Revenue rose nearly 8% to $6.97 billion, slightly ahead of analyst estimates. North America continued to be a big demand driver, with sales up 9% for the quarter.

The stellar report sent the stock well into fresh highs.

Can it keep delivering?
At more than 20 times forward earnings estimates, Nike is not a cheap stock on the surface. Sure, it's a far better deal than smaller competitor and growth machine Under Armour, which trades at a ridiculous 42 times forward earnings, but paying a substantial premium for a company already so big and market-saturating can be unnerving.

The thing is, Nike's brand is only gaining ground. The swoosh is one of the most recognized symbols on the planet, and the emerging markets love it just as much as the mature ones. Its size doesn't make it a dinosaur, either. Fast Company magazine has honored Nike as the No. 1 most innovative company of the year -- an impressive accolade considering the company competed with the hot start-ups and Internet giants. The reason was that, beyond the power of the swoosh, the company finds success in its experiments -- from its Internet-enabled fitness bracelet to shoes that feel like socks, a cheaper, eco-friendly alternative to the sneaker.

In management comments, CEO Mark Parker saw its China business stabilizing, and expects sales to increase slightly in the coming quarter, and stay roughly flat for the full year. Future orders were up 8% globally, with Central Europe showing a tremendous 25% gain. Clearly, the future remains bright for Nike across the globe.

Nike may not make the list of value investors' must-haves, but the shares don't appear to be overvalued by any stretch. Despite its global dominance as a brand, Nike continues to innovate and grow its markets in every region of the world. Owning a piece of this all-star is a good bet on the global economic recovery.

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