Nike had underperformed the market in 2021 until it reported stunning results in the fourth quarter of fiscal 2021 on June 24. The sportswear giant’s share price jumped 20% to new highs. And NKE’s prospects are quite impressive.
Fourth Quarter Snapshot
Nike’s fourth-quarter sales jumped 96% from the year-ago quarter and 21% from pre-pandemic in the fourth quarter of fiscal 2019. The company also went from a adjusted loss of -$0.51 per share to +$0.93 to squash Zacks’ adjusted EPS estimate by 82%.
The company’s margins have climbed as its direct-to-consumer push gains momentum. Sales of Nike Direct jumped 73% to $4.5 billion. “Fiscal 21 was a pivotal year for NIKE as we brought our Consumer Direct Acceleration strategy to life across the market. Fueled by our momentum, we continue to invest in innovation and our digital leadership to lay the foundation for NIKE’s long-term growth,” CEO John Donahoe said in prepared remarks.
Nike’s fiscal 2021 sales jumped 19% to rebound from its mildly covid-affected fiscal 2020 that sent sales down 4.4%. Last year’s revenue growth was NKE’s best in decades – at $44.54 billion – as it once again proves it is the undisputed champion of the activewear world and sneakers, despite the rise of Lululemon LULU and Adidas ADDYY booming in North America.
NKE continuously ranks among the world’s most valuable brands alongside Coca-Cola KO, McDonald’s MCD, Apple AAPL and others. And he’s thrived on his ability to set trends, constantly adapt, and tie the Swoosh to the biggest sporting, athletic and cultural icons.
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Nike has invested in the future through multiple shopping apps and an impressive digital marketplace that spans from its own websites to social media platforms where people shop directly. The firm has also gone on to digitize its supply chain, in particular through acquisitions, in order to be more predictive.
The company’s supply chain and shipping setbacks in the third quarter, due to broader global congestion, no longer appear to be hampering the company. Zacks estimates NKE’s revenue to grow 12% in FY22 and another 10.3% in FY23, two events that would mark its largest revenue expansion ever. since 2012.
The sportswear giant’s adjusted EPS numbers are expected to climb more than 18% in FY22 and FY23. Nike has also consistently exceeded our earnings estimates and its longer-term consensus earnings estimates have jumped since its report on the basis of strong forecasts.
NKE, which was down in 2021, has climbed 20% since its release to hit new highs of over $160 per share on Tuesday. Nike has now risen 185% over the past five years to explode its industry and surpass 120% of the S&P 500. And despite records, NKE is trading more than 20% below its own highs in the year at 37X 12-month forward earnings, which also marks a reduction from its median.
Nike’s strong post-release EPS reviews help it earn a Zacks #1 (Strong Buy) rating, as well as an “A” grade for Momentum in our Style Scores system. NKE could face a short-term setback given its huge run.
Still, long-term investors might want to consider the stock since 16 of Zacks’ 21 brokerage recommendations are “Strong Buys,” with none below a “Hold.” Nike also pays a dividend and resumed buybacks last quarter.
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You’ve known this company from its glory days, but few would expect it to be ready for a monster turnaround. Fresh off a successful repositioning and rife with A-list celebrity endorsements, it could rival or surpass other recent Zacks stocks which are set to double as Boston Beer Company which jumped +143.0% in just over of 9 months and Nvidia which exploded + 175.9% in one year.
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