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VIDEOTicker Shock: Five Reasons Not to Be in Nike's Shoes
Thursday's top stories and stocks with potential to move.
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Asian stocks traded higher overnight. The Hang Seng was up 2.14% and the Nikkei was up 2.15%. European stocks were showing me some red earlier this morning.
Here's what I’m focused on this morning (besides the upcoming weekend):
Nike (NKE):
Excluding items, the company that needs no introduction put up $0.99 in its fourth quarter. That was better than the $0.96 analysts had been figuring on. But is now the time to stomp into the stock?
1. I didn’t find this line in the release all that encouraging:
“The Company reported worldwide futures orders for Nike brand athletic footwear and apparel, scheduled for delivery from June 2009 through November 2009, totaling $7.8 billion, 12% lower than orders reported for the same period last year. Excluding currency changes, reported orders would have declined 5%”
2. It trades at about 14.6 times the 2010 estimate. Ideally, I’d like to scoop it up a bit cheaper.
3. From an insider-buying perspective, I'd like to see executives lacing up a pair and taking the shares for a run.
4. I’d also look kindly upon share repurchases right about now. However, according to the release:
“The Company did not purchase any shares during the fourth quarter. Under the Company’s 4-year, $3 billion share repurchase program, approved by the Board of Directors in June 2006, a total of 10.6 million shares for approximately $639.0 million was purchased during the first 2 quarters of fiscal 2009. Program to date, the Company has purchased a total of 49.2 million shares for approximately $2.7 billion.”
5. What’s my motivation to hop aboard now? The stock has actually had a decent run since March. But will that keep going? I can't answer with a resounding, yes.I’m punting on this one. Sorry, Nike bulls.
Bed Bath & Beyond (BBBY):
It looks like the New Jersey-based company did go a little above and beyond in its first quarter. In the period ended May 30, the company earned $0.34 a share, well north of the $0.25 a share the Street had been expecting. Meanwhile, its sales line came in at about $1.69 billion, which was also a smidge better than expected.
My thoughts: 1. It was a pretty big beat, and I’m a bit surprised. I figured with most consumers wanting to save coin, they'd drive over to Wal-Mart (WMT) or Target (TGT) instead.
2. Its comps were off by 1.6%. Obviously, I’d have liked to see them in positive territory, but to take the glass-half-full view, it was better than the 7.5% drop in comps Pier 1 (PIR) saw in its first quarter. Meanwhile, Williams Sonoma (WSM) had seen its first-period comps drop a hefty 21%.
3. Can it continue to beat the Street?
4. In spite of the good news I mentioned above, I find it tough to get past the fact that it trades at about 17.7 times this year’s estimate. It’s a tad rich for my taste. 5. When I last wrote about the stock on April 8, my instinct was to steer clear. I stand by that and will continue to take a pass.
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