Everything is changing. Much of what used to be is gone. Wall Street firms are no more, morphed into banks or simply disappeared. It feels like the end of an era. And so it is.
Change always creates anxiety. Investors are dealing with more change than usual these days. And questions. There are so many questions with no answers that stress levels are reaching new heights. What about the government bailout? Will it work? What about all the bad mortgages? How many are there? Will they all default? Are stocks still a good investment? Are all investments bad? Does money belong in a strong box under the house where at least it's accessible? Will I keep my job, my house? Will the banking system fail?
As I noted in my earnings preview earlier this week, Wall Street was looking for 92 cents earnings per share for Nike's first fiscal quarter. The company surprised to the upside with a reported EPS of $1.03 a share. While this is down year-over-year from the $1.12 EPS it reported last year in the first quarter, it was still a good quarter considering the current economic environment.
Revenues grew nicely for Nike in the quarter, up a very respectable 17% to $5.4 billion. This also came in above analyst estimates of $5.19 billion.
One aspect of the company's overall business I discussed in the preview was that last quarter the company was able to overcome weak U.S. sales numbers by posting strong growth in international markets. This quarter, too, a weak U.S. dollar has helped boost sales in India and Asia, in particular China, where the recent summer Olympic games were held.
Wednesday afternoon following the market close, Nike Inc. (NYSE: NKE) will be reporting its fiscal first quarter earnings, and analysts are looking to see the company show earnings for the quarter of 92 cents per share.
The last time that the company reported was back on June 25, when it was able to beat out Wall Street estimates by two pennies, with a reported 98 cents per share for its fiscal fourth quarter, mostly a result of strong international demand, which was able to overcome weak consumer spending that hurt the company at home in the U.S. In fact, to find the last time that the company reported quarterly figures under Wall Street estimates, you would have to go all the way back to its fiscal fourth quarter 2006 when it missed by a penny, with a reported 70 cents per share.
On a year over year basis, should Nike come in with 92 cents per share, it would be a 16.9% drop from the $1.12 that it was able to earn during the first quarter of 2007.
Earnings reports continue to dribble in as the quarter winds down. Much of the attention this week will be on homebuilders KB Home (NYSE: KBH) and Lennar Corp. (NYSE: LEN) as investors look for any sign that the housing sector has bottomed (home sales numbers are also due out this week; see below). Analysts surveyed by Thomson Financial anticipate that both companies will report that they narrowed their losses in the most recent quarter.
KB Home's expected $1.25 per share loss, on revenue of $725.5 million, compares to the previous quarter loss of $3.30 and to a year-ago loss of $6.19. However, KB Home's losses in the past few quarters have been deeper than expected. The Los Angeles-based homebuilder's long-range earnings growth forecast is 10.5%, less than the S&P 500. Analysts continue to recommend holding KB Home, and have for at least 120 days. Shares, however, reached a new 52-week high of $31.69 on Friday, and they are up 10.5% year to date.
Lennar is expected to post a loss of 52 cents per share, on revenue of $1.1 billion. That compares to the previous quarter's per-share loss of 76 cents and to a year-ago loss of $3.25. While Lennar also has tended in the past few quarters to miss expectations, the Miami-based company managed a positive surprise in the first quarter of 2008. Lennar's long-range earnings growth forecast is 10.3%, about the same as KB Home's. Analysts also recommend holding Lennar. Friday, shares of Lennar also reached a 52-week high, $27.75, but they are down 6.4% year to date.
This post is part of our Ads Gone Bad series. Share your thoughts and memories of this ad in the comments, and be sure to check out our other posts on marketing gone wrong.
Bloggers weren't kind to Nike's campaign for its Hyperdunk basketball shoes in late July. Three printed ads produced by Wieden+Kennedy were blamed as fostering anti-gay messages.
Most of the ads depicted one basketball player dunking over another in vaguely homo-erotic positions (mostly with one player's face in the other's crotch) with 'trash talk'-type slogans such as "Punks Jump Up," "Say Hello," "That Ain't Right." The hot-button line was from a popular 1992 rap song, "Punks Jump Up to get Beat Down," by Brand Nubian. The song was a good theme for basketball courts but for one thing; its lyrics, which advocated violence against homosexuals and featured the line, "I ain't down with gays."
At first, Nike supported the ad campaign. But when bloggers took the shoe giant to task for its "ethical sloppiness," Nike and its ad agency backed off and decided to withdraw the ads "to underline our ongoing commitment to supporting diversity in sport and the workplace."
Nike's move coincided with an ad-industry-wide debate about the use of gay stereotypes. Mars, Inc. also pulled an ad during the same week based on its criticism from national homosexual groups.
Whatever other problems it has, Nike Inc. (NYSE: NKE) has, historically, been on the side of the gay community. From sponsoring athletes at the Gay Games to offering domestic partnership benefits to its gay and lesbian employees, there is little fault for a gay rights activist to find with Nike.
But that didn't stop some people from making up fake controversies. The company's ads for its Hyperdunk basketball shoes feature competing basketball players in photos with heads in each other's crotches, hands on butts, etc. -- stuff that happens all the time during basketball games.
Now, in response to the criticism, the company is pulling the ads, citing its desire "to underline our ongoing commitment to supporting diversity in sport and the workplace."
The ads are funny and they're not homophobic -- Nike's track record on these issues demonstrates that. LGBT activists who make an issue out of stuff like this marginalize the real issues, by making it look like there aren't bigger battles to fight. With one presidential candidate who just learned what "LGBT" means, there clearly are. But silly stuff like this will turn people off and prevent those issues from being taken seriously.
If you love Adidas' clothing and footwear then I have some good news for you. Adidas is eying to open about 2,300 new stores in China by 2010, lifting its total number to 6,300. The company's decision came as a result of strong demand from China even in times when we might expect to see some downturns.
Frederic Seiller, a vice president in charge of retail operations for Greater China, stated that the the global economic slowdown had no impact on Adidas's sales in China. In addition, the company is optimistic about its further gains, and forecast a nice demand from the local sportswear market. From this point of view, total sales in China are expected to come to 1 billion euros by 2010.
As well as getting growth in revenue, by opening its biggest store in the world in central Beijing Adidas aims to beat rival Nike Inc. (NYSE: NKE). Back in 2007, China became Nike's second-largest market, and its Chinese sales reached $1 billion in 2008.
According to Trey Thoelcke's coverage on earnings reports, Nike (NYSE: NKE), a competitor of Adidas (OTC: ADDDY), beat Wall Street expectations for its Q4 results. Analysts thought that Nike might be good for earnings of $0.96 per share, but the footwear entity booked $0.98 per share, beating estimates by two cents (thankfully, it wasn't the proverbial penny, which definitely gets boring after awhile). Investors didn't seem to be too keen on the results, as the stock sold off in after-hours trading on Wednesday, dropping almost 5%.
Let's take a closer look at the results. For the fourth quarter, the top line increased by 16% - not a bad revenue jump. And that $0.98 earnings per-share figure represented an increase of 14%. The fiscal year actually looked pretty good, too. Revenues increased 14%, and net income expanded by 28% to $3.74 per share. Gross margin expanded, and worldwide futures orders were up 11%. I like all these double-digit numbers, and I like the fact that the company paid out more in dividends this year than last, and I can see that Nike is taking advantage of the weak dollar through its international exposure.
Nike's stock has performed well, over the last five years, but lately it's not been as strong. Investors would certainly be justified in having a cautious stance with a company like Nike considering the current economic climate. Sneakers obviously might not be worth a lot of discretionary income in a time of high energy costs and slow growth. But with numbers like these, I have to say that Nike knows how to leverage its brand equity to full effect. This was a great yearly report, and if the stock pulled back a little further, I would definitely consider it.
Disclosure: I don't own any company mentioned here; positions can change at any time.
Here's a quick recap of some additional earnings reports on Wednesday.
Beaverton, Ore.-based Nike Inc. (NYSE: NKE) said strong growth overseas helped boost its fourth-quarter profit by 12% to $490.5 million, or 98 cents per share. Analysts polled by Thomson Financial expected the company to earn 96 cents per share for the quarter. Shares fell more than 5% in after-hours trading to $62.15.
CKE Restaurants Inc. (NYSE: CKR) said its first-quarter profit climbed 8% to $16.6 million, or 31 cents per share, helped by a small increase in same-store sales at Carl's Jr. restaurants. Revenue fell 3% to $466.2 million. Analysts polled by Thomson Financial expected profit of 27 cents per share on revenue of $465.5 million. Shares fell 5 cents to $12.25 in after-hours trading.
Red Hat Inc. (NYSE: RHT) said its fiscal first-quarter profit rose 6.6% to $17.3 million, or 8 cents per share. Adjusted earnings were 18 cents per share. Revenue rose 32% to $156.6 million. Analysts polled by Thomson Financial on average predicted a profit of 18 cents per share on revenue of $153 million. Shares fell 19 cents in after-hours trading to $22.11.
General Mills Inc. (NYSE: GIS) said its fourth-quarter profit dropped 17% to $185.2 million, or 53 cents per share. Adjusted earnings were 73 cents per share, which met Wall Street expectations. Sales increased 13% to $3.47 billion beating expectations. The company reaffirmed its guidance for the full year. Shares fell almost 2% to $61.19.
It is going to be an interesting week. The Fed and oil will be at odds, and tempers are sure to flare on the trading floors. There are many earnings and eco reports we are looking at, and it is hard to choose which will be front and center. Traders and investors will be closely following every move by the Fed as they will be releasing a policy statement at 2:15 p.m. on Wednesday.
Also, stocks within the homebuilders group will be front and center as a few key players will share their earnings results. Have you seen the charts of these companies lately? Click for a good comparison. And after you take a peek, you may also wonder if they are actually stock charts or ski slopes. So with that as the backdrop, here are a few names that may actually be undercovered and worth a look.
Tuesday, June 24
Anything related to the automobile industry has been under siege of late, and I can't imagine how that will change anytime soon. HB Fuller Co. (NYSE: FUL) is involved in the manufacturing of the industrial performance/adhesive products for the assembly/packaging and automobile markets. The fact that the economy is lagging would lead one to the realization that, unless we see a quick turnaround of epic proportions, the reality of a lower share price will come with the next earnings release. Several down days of late have also had increasing volume, and that is not a good sign for a stock that is beginning to show signs of breaking down. Even so, First Call is showing a $0.45 per share quarterly estimate on $347 million of revenue.
After a U.S. Open victory that was perhaps the most thrilling of his entire career, Tiger Woods will miss the rest of the season to undergo surgery to repair a torn ligament in his left knee.
Obviously this is bad news for his main sponsor, Nike (NYSE: NKE). They pay him handsomely to hit their clubs and wear their hat (although his bag bears the logo for Buick), and watching a close-up of his 18th hole birdie was priceless marketing: as the ball rolled, the Nike swoosh was in plain view.
And in a larger sense, this is bad news for anyone who's marketing on the PGA Tour. It's a well-known fact that golf's ratings plummet for any event Tiger isn't playing in. I mean, who really cares about Justin Leonard and Geoff Ogilvy? There's Tiger and then there's everyone else. Wake me when it's over -- maybe I'll go watch some arena football.
It wasn't that long ago that Wall Street was in love with Crocs, Inc (NASDAQ: CROX), the maker of the trendy slippers that took the world by storm last year. After going on a tear for most of 2007, the stock started to break down last November, and has been in a tail spin for the past 5 months.
The company is going to be reporting its first quarter numbers tomorrow after the market close, and all signs are pointing to yet another troublesome quarter for the company. Earnings.com is showing Wall Street estimates of 10 cents a share, but that number does not really hold too much water after the company announced a much weaker forecast last month in its preliminary release.
Last month, CROX shocked Wall Street when it said that it expected to see a 5 cent per share loss in the quarter, and revenues falling somewhere between $195 and $200 million. After that news came out, the already troubled stock took a serious nose dive, and gave up around 40% of its value.
This post is part of our Battle of the Brands feature. Let us know which brand you prefer, and check out other Battle of the Brands posts.
The story of Nike Inc. (NYSE: NKE) and Under Armour (NYSE: UA) is just one more David and Goliath scenario. Just like in the biblical story, David's battle (UA) was more one of survival against the odds, while Goliath (NKE) truly did want to vanquish the diminutive challenger. Under Armour is capitalized at $1.28 billion while the long-established and legendary Nike has a capitalization more than 20 times the size at $26.38 billion.
NIKE, the world's #1 shoemaker, does more dominating than assisting, to capture more than 20% of the U.S. athletic shoe market. It designs and sells shoes for a variety of sports, including baseball, cheer-leading, golf, volleyball, hiking, tennis, and football. Under Armour is proving its mettle as an apparel warrior. Since its foray into the sporting goods market, the maker of performance athletic undies and apparel has risen to the top of the industry pack, boasting a big portion of the compression garment market.
In addition to playing a dominant role in the shoe market, Nike has retail and wholesale outlets that sell a broad range of branded sports gear, including clothes, watches, balls, hats, and an expanding array of accessories. Under Armour is expanding as well, trying to get a foot-hold (could not resist) in the shoe market starting with a series of cross-trainers. They hope to capture perhaps 10% of the market as they promote their up-and-coming brand.
Ted Allrich is the founder of 
Wednesday afternoon following the market close, 
Earnings reports continue to dribble in as the quarter winds down. Much of the attention this week will be on homebuilders 
This post is part of our 
Whatever other problems it has, 
After a U.S. Open victory that was perhaps the most thrilling of his entire career, Tiger Woods will miss the rest of the season to undergo surgery to repair a torn ligament in his left knee.
It wasn't that long ago that Wall Street was in love with 
This post is part of our 
Analyst sees oil dropping to $50 on global economic slowdown
Lehman screws workers out of severance payments
No Cramer, now is not the time to panic!
