When it comes to athletic retailers, Nike (NKE) is a man among boys. With a market capitalization of more than $77 billion, it is nearly twice the size of its largest competitor, Adidas (ADDDF), and almost 5x bigger than Under Armour (UA). Because of this advantage, Nike’s annual revenues exceed almost $29 billion and its stock is currently trading at all-time highs of roughly $90.
On Friday alone, Nike stock gained nearly $10, an increase of more than 12-percent. Nike’s phenomenal market performance came after its executives announced the company had beat 2015 Q1 analyst revenue and earnings expectations. More impressively, Nike didn’t just surpass expectations, it blew them out of the water. The athletic retailer reported first quarter revenues of $7.98 billion compared to analyst estimates of $7.8 billion, and earnings of $1.09 per share compared to the consensus expectation of $0.88 per share. For a company of its size, an earnings beat of this scale is beyond rare, to say the least.
To put this incredible quarter in perspective, compared to the same period last year, Y/Y (year over year) revenues increased 14.5%, net earnings increased 23.5%, and EPS increased a whopping 27%. These gains are primarily a reflection of Nike’s consistent and ever-expanding worldwide focus. North American sales increased 12%, Western European sales increased 32%, Central/Eastern European sales increased 9%, and China sales increased 20%.
Moreover, Nike has supplemented its global growth pursuits through the masterful selection of sponsorships, including both international players and teams; Nike has a foothold in seemingly every sport, sponsoring top players like golfers Rory McIlroy and Tiger Woods, tennis superstars Maria Sharapova, Rafael Nadal, Roger Federer, and Serena Williams, basketball legends Michael Jordan, Kevin Durant, Kobe Bryant, and LeBron James, NFL “All-Pros” Drew Brees, Calvin Johnson, and Troy Polamalu, and MLB all-stars Andrew McCutchen, Evan Longoria, and legendary Derek Jeter. Not to mention that Nike also sponsors international footballers Cristiano Ronaldo, Wayne Rooney, and 2014 FIFA World Cup game-winning-scorer Mario Götze.
Because of the World Cup, American investors may finally realize the value of Nike’s numerous international soccer sponsorships as probably its most important. Nike sponsors a number of Barclay’s Premier League teams, including the most recent champions Manchester City, France’s top club team Paris St. German, Italian clubs Roma and Juventus, Spanish star-studded clubs Atlético Madrid and Barcelona, as well as a large number of international teams such as Brazil, the Netherlands, and the United States.
Between growing sales around the world and an impressive sponsorship portfolio, Nike is poised to continue its incredible hot streak. With its market capitalization approaching $80 billion, I expect Nike to remain a solid long-term investment, especially considering it faces weak competition and holds $3.3 billion more cash than it does debt. Furthermore, I believe that Nike could reach $100 billion in market capitalization by 2017, and definitely by 2018, with the next World Cup set to cause future revenue boosts similar to that which is currently observed.