The athletic apparel designer and manufacturer Nike (NKE -0.74%), best known for the marketing slogan "Just Do It" and the Nike check mark or "Swoosh," was one of the three components added to the Dow Jones Industrial Average (^DJI -0.98%) this past September. The addition happened in a trade where Hewlett-Packard, Alcoa, and Bank of America were removed from the Dow and Nike, Goldman Sachs, and Visa were added. And despite the fact that Nike has only been a part of the Dow for a few months, if things remain constant, Nike will finish 2013 as the Dow's second-best performer of the year as the stock is currently up more than 53%, just behind Boeing's 78% it has increased year to date.
So, since the company had such a wonderful 2013, as it was added to the most well-known index in the world and produced massive returns, what can investors expect in 2014?
Let's see what Wall Street analysts believe will happen. Earnings growth estimates for the current quarter are pinned at 1.8% -- for the following quarter they are at 6.8% -- a total of 13.4% for the current year. While that's not bad, it's certainly not anything to write home about. Looking further out, those analysts believe growth of 16.1% for 2015 and just 12.69% for the next five years. As for sales, analysts are looking for 8.1% increase this quarter, an 8.7% increase the following quarter and 8.7% growth this year and next.
Compared to the most recent earnings results when Nike posted quarter revenue growth of 7.7%, slightly below what analyst are looking for this coming quarter, the apparel company reported a 37.6% increase to earnings last quarter, which makes the 1.8% growth expected during the current three-month period a little more understandable.
But when these growth rates are compared to Nike's competition, the company stacks up very well, especially considering it is multiple times larger than its closest rival.
|
Name |
Market Cap |
Past Qtr. Growth Revenue/Earnings |
Current Qtr. Growth |
Next Qtr. Growth |
This Year's Growth |
Next Year's Growth |
|---|---|---|---|---|---|---|
|
Nike |
$70.57 billion |
7.7%/37.6% |
1.8% |
6.8% |
13.4% |
16.1% |
|
Adidas (ADDYY -0.11%) |
$23.25 billion |
(7%)/(8.1%) |
N/A |
N/A |
(43.2%) |
26.43% |
|
Under Armour (UAA -2.34%) |
$8.65 billion |
25.7%/27% |
12.8% |
57.1% |
19% |
24.3% |
|
lululemon athletica (LULU -1.26%) |
$10.16 billion |
21.9%/(1.3%) |
5.1% |
12% |
5.9% |
26.5% |
Source: Yahoo! Finance.
As you can see, while Nike isn't predicted to have the best growth in the coming year, the growth it is being predicted to display is healthy and substantial for a company Nike's size.
Furthermore, for a retail/fashion company to not only stick around as long as Nike has, but to be the size that it has grown to and still being expected to grow by double digits, is absolutely amazing. Additionally, when compared side by side, the Under Armours and Lululemons of the world would need to increase their growth dramatically to catch up with Nike and the fact that these new comers like Under Armour and Lululemon, (who may not be new now but weren't around when Nike first started) haven't been able to eat Nike's lunch as we often see in the world of fashion, does say a lot about the Nike brand and customer loyalty. And that is what sets Nike apart from the others.
Like all the great retail/consumer-focused companies, Nike has built a brand that customers know, trust, and are willing to pay a little extra for. On top of that, Nike expanded its brand to the Jordan collection, which started as just shoes but is now its own line of clothing and accessories. They have now not only built one brand but two. As the company continues to expand its reach around the world, grow its product offerings, and develop new brands in the coming year, I believe Nike will not only be able to hit the growth estimates posted above but beat them.
Lastly, you may be wondering which of the athletic retailer would be best to buy going into 2014. Based on all things being considered, it is easy to toss Adidas out from the get-go. Lululemon has experienced a lot of issues over the past year with the sheer, see-through pants and comments from the company's founder, so based on those reasons, I'll toss the lemon away. As for Under Armour and Nike, I believe you can't go wrong with either company. I personally own Under Armour but would be a buyer of Nike at today's price. The only difference I see with the two is that Nike is just a slightly older, more mature, slower-growing company, whereas Under Armour is still experiencing that fast, high growth. But again, either is fine and they both have pros and cons. Nike pays a dividend, Under Armour does not. Under Armour is growing fast and will likely continue to do just that but is still small while Nike is a larger company and can move into any new market around the world and Under Armour just isn't at that level yet.
Final thoughts
All in all, Nike will continue to perform well in 2014 and the coming years due to its brand strength and its ability to constantly stay relevant and on the cutting edge of fashion and athletic technology. Will the stock rise another 50% in 2014? I wouldn't bet on it, but if the company can keep growth rates at a decent level, I believe it will continue to beat the market.
