Why Nike is Lagging the Dow Today

The economy grew even faster than we thought in the third quarter, and the Dow Jones Industrial Average (DJINDICES: ^DJI  ) is hitting new highs as a result.

This morning, the Commerce Department said third-quarter GDP growth was 4.1%, versus the previous estimate of 3.6%. Revisions are common when judging employment or GDP, but this update is notable because it's the second-highest rate of growth in seven-and-a-half years. Investors like the revision and the Dow is up 0.48% in late trading and flirting with another record high close.

Nike falls after earnings
One Dow stock that isn't enjoying a great day is Nike (NYSE: NKE  ) , which is down 1.33% and is the index's worst stock today. The athletic apparent behemoth released fiscal second-quarter earnings last night and investors were apparently underwhelmed by 8% revenue growth to $6.4 billion and a 3% increase in net income to $537 million, or $0.59 per share.  

Investors never like it when net income grows slower than sales, but Nike is investing in advertising for upcoming events like next year's Olympics and World Cup. These are events that will create value for Nike and its shareholders, so while margins may be down this quarter that investment will drive growth over the long run.

It's impressive how a company of Nike's size can continue to grow at nearly a double-digit pace despite muted economic growth and barely any benefit from China. It was actually Europe that supplied most of Nike's growth, which is shocking considering the weak economy we've seen there.

This stock isn't cheap at 22 times forward estimates, but Nike is one of those companies that seems to never go out of fashion and are consistently able to seize on new market. That's why the stock has been a big winner for investors over the long term; this quarter is a testament to that vision.

Stocks to buy for next year and beyond
As long-term investors, we're looking for trends we can buy and hold long-term. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report: "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.


Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2773312, ~/Articles/ArticleHandler.aspx, 11/27/2014 12:48:19 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement