Why Nike is Lagging the Dow Today
The economy grew even faster than we thought in the third quarter, and the Dow Jones IndustrialAverage is hitting new highs as a result.
This morning, the Commerce Department said third-quarter GDP growth was 4.1%, versus the previous estimate of 3.6%. Revisions are common when judging employment or GDP, but this update is notable because it's the second-highest rate of growth in seven-and-a-half years. Investors like the revision and the Dow is up 0.48% in late trading and flirting with another record high close.
Nike falls after earnings
One Dow stock that isn't enjoying a great day is Nike , which is down 1.33% and is the index's worst stock today. The athletic apparent behemoth released fiscal second-quarter earnings last night and investors were apparently underwhelmed by 8% revenue growth to $6.4 billion and a 3% increase in net income to $537 million, or $0.59 per share.
Investors never like it when net income grows slower than sales, but Nike is investing in advertising for upcoming events like next year's Olympics and World Cup. These are events that will create value for Nike and its shareholders, so while margins may be down this quarter that investment will drive growth over the long run.
It's impressive how a company of Nike's size can continue to grow at nearly a double-digit pace despite muted economic growth and barely any benefit from China. It was actually Europe that supplied most of Nike's growth, which is shocking considering the weak economy we've seen there.
This stock isn't cheap at 22 times forward estimates, but Nike is one of those companies that seems to never go out of fashion and are consistently able to seize on new market. That's why the stock has been a big winner for investors over the long term; this quarter is a testament to that vision.
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The article Why Nike is Lagging the Dow Today originally appeared on Fool.com.
Fool contributor Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends Nike. The Motley Fool owns shares of Nike. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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