February 28, 2016 NYSE: NKE NIKE INC BUY A+ A A- HOLD B+ B Annual Dividend Rate $0.64 B- C+ C Annual Dividend Yield 1.02% SELL C- D+ D Beta 0.62 Sector: Consumer Goods & Svcs NKE BUSINESS DESCRIPTION NIKE, Inc., together with its subsidiaries, designs, develops, markets, and sells athletic footwear, apparel, equipment, and accessories for men, women, and kids worldwide. Weekly Price: (US$) D- E+ E E- F Market Capitalization $84.2 Billion Sub-Industry: Footwear SMA (50) BUY 52-Week Range $47.25-$68.19 RATING SINCE TARGET PRICE 02/25/2009 $81.87 Price as of 2/25/2016 $62.38 Source: S&P SMA (100) 1 Year 2 Years 85 TARGET PRICE $81.87 TARGET TARGETPRICE PRICE$81.87 $81.87 TARGET PRICE $81.87 80 75 70 65 STOCK PERFORMANCE (%) 3 Mo. Price Change -6.99 1 Yr. 28.85 60 3 Yr (Ann) 32.16 55 50 GROWTH (%) Last Qtr 4.14 19.84 21.62 Revenues Net Income EPS RETURN ON EQUITY (%) NKE Q2 2015 27.00 Q2 2014 25.61 Q2 2013 23.54 12 Mo. 5.30 20.78 22.32 3 Yr CAGR 8.82 20.67 19.39 45 40 35 Rating History BUY Ind Avg 21.97 20.75 21.48 S&P 500 12.28 14.59 13.97 Volume in Millions 75 50 25 2014 2015 2016 0 COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History P/E COMPARISON RECOMMENDATION We rate NIKE INC (NKE) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel its strengths outweigh the fact that the company shows weak operating cash flow. 30.36 29.67 21.53 NKE Ind Avg S&P 500 EPS ANALYSIS¹ ($) HIGHLIGHTS NIKE INC has improved earnings per share by 21.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, NIKE INC increased its bottom line by earning $1.85 versus $1.49 in the prior year. This year, the market expects an improvement in earnings ($2.15 versus $1.85). 2013 2014 Q2 0.45 Q1 0.67 Q4 0.49 Q3 0.45 Q2 0.37 Q1 0.55 Q4 0.39 Q3 0.38 Q2 0.30 Q1 0.43 The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Textiles, Apparel & Luxury Goods industry average. The net income increased by 19.8% when compared to the same quarter one year prior, going from $655.00 million to $785.00 million. 2015 NA = not available NM = not meaningful 1 Compustat fiscal year convention is used for all fundamental data items. NKE's revenue growth trails the industry average of 16.8%. Since the same quarter one year prior, revenues slightly increased by 4.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share. Although NKE's debt-to-equity ratio of 0.16 is very low, it is currently higher than that of the industry average. To add to this, NKE has a quick ratio of 1.76, which demonstrates the ability of the company to cover short-term liquidity needs. The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Textiles, Apparel & Luxury Goods industry and the overall market, NIKE INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500. This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved. Report Date: February 28, 2016 PAGE 1 February 28, 2016 NYSE: NKE NIKE INC Sector: Consumer Goods & Svcs Footwear Source: S&P Annual Dividend Rate $0.64 Annual Dividend Yield 1.02% PEER GROUP ANALYSIS 35% V FA AB OR DECK LE CHKE R VO FA LE AB -15% UN Revenue Growth (TTM) NKE -30% ICON CROX 40% EBITDA Margin (TTM) Companies with higher EBITDA margins and revenue growth rates are outperforming companies with lower EBITDA margins and revenue growth rates. Companies for this scatter plot have a market capitalization between $17.1 Million and $84.2 Billion. Companies with NA or NM values do not appear. *EBITDA – Earnings Before Interest, Taxes, Depreciation and Amortization. REVENUE GROWTH AND EARNINGS YIELD 35% 52-Week Range $47.25-$68.19 Price as of 2/25/2016 $62.38 The companies in the textiles, apparel, and luxury goods industry sell their products through multiline retailers and over the internet. Some of the larger players in this industry group cross over into the specialty retailer category with exclusively branded stores of their own such as Nike, Coach, Fossil, and Ralph Lauren. While textiles may have once been a large portion of this industry group, that segment is down to a few players such as Unifi (UFI), Culp (CFI), Crown Crafts (CRWS), and Hallwood Group (HWG). Most of the industry is focused on brands for shoes, clothing, eyewear, and wrist watches. Companies in the group tend to own a variety of proprietary brands in order to design, develop, market, and distribute products targeted to specific consumer segments. CTHR COH Market Capitalization $84.2 Billion INDUSTRY ANALYSIS The textiles, apparel, and luxury goods industry includes very well-known brands such as Nike (NKE), Coach (COH), Luxottica Group (LUX), Ralph Lauren (RL), Fossil (FOSL), Under Armour (UA), HanesBrands (HBI), Columbia Sportswear (COLM), Crocs (CROX), and Movado Group (MOV). REVENUE GROWTH AND EBITDA MARGIN* WWW Beta 0.62 SKX PEER GROUP: Textiles, Apparel & Luxury Goods Recent Ticker Company Name Price ($) NKE NIKE INC 62.38 RCKY ROCKY BRANDS INC 11.13 CROX CROCS INC 9.86 SKX SKECHERS U S A INC 33.00 ICON ICONIX BRAND GROUP INC 8.29 SHOO MADDEN STEVEN LTD 35.60 WWW WOLVERINE WORLD WIDE 18.99 DECK DECKERS OUTDOOR CORP 55.96 CTHR CHARLES & COLVARD LTD 0.81 CHKE CHEROKEE INC/DE 17.34 COH COACH INC 38.90 Market Cap ($M) 84,207 84 726 4,289 401 2,228 1,954 1,815 17 151 10,802 Price/ Earnings 30.36 12.79 NM 21.95 4.51 19.24 15.96 12.44 NM 17.52 29.47 Net Sales TTM ($M) 31,339.00 269.30 1,088.43 3,147.32 390.67 1,421.89 2,691.60 1,837.20 29.58 34.35 4,237.50 Net Income TTM ($M) 3,620.00 6.60 -66.12 231.91 96.00 112.94 122.80 147.38 -10.47 8.71 366.30 The peer group comparison is based on Major Footwear companies of comparable size. V FA AB OR DECK LE NKE SHOO CHKE WWW COH RCKY ICON R VO FA LE AB -15% UN Revenue Growth (TTM) CTHR -70% CROX 30% Earnings Yield (TTM) Companies that exhibit both a high earnings yield and high revenue growth are generally more attractive than companies with low revenue growth and low earnings yield. Companies for this scatter plot have revenue growth rates between -10.8% and 32.4%. Companies with NA or NM values do not appear. This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved. Report Date: February 28, 2016 PAGE 2 February 28, 2016 NYSE: NKE NIKE INC Sector: Consumer Goods & Svcs Footwear Source: S&P Annual Dividend Rate $0.64 Annual Dividend Yield 1.02% Beta 0.62 Market Capitalization $84.2 Billion 52-Week Range $47.25-$68.19 Price as of 2/25/2016 $62.38 COMPANY DESCRIPTION NIKE, Inc., together with its subsidiaries, designs, develops, markets, and sells athletic footwear, apparel, equipment, and accessories for men, women, and kids worldwide. The company offers products in eight categories, including running, basketball, football, men's training, women's training, sportswear, action sports, and golf under the NIKE and Jordan brand names. It also markets products designed for kids, as well as for other athletic and recreational uses, such as cricket, lacrosse, tennis, volleyball, wrestling, walking, and outdoor activities. In addition, the company sells sports apparel and accessories; and markets apparel with licensed college and professional team and league logos. Further, it sells a line of performance equipment, including bags, socks, sport balls, eyewear, timepieces, digital devices, bats, gloves, protective equipment, golf clubs, and other equipment under the NIKE brand name for sports activities; various plastic products to other manufacturers; athletic and casual footwear, apparel, and accessories; casual sneakers, apparel, and accessories under the Converse, Chuck Taylor, All Star, One Star, Star Chevron, and Jack Purcell trademarks; and action sports and youth lifestyle apparel and accessories under the Hurley trademark. NIKE, Inc. sells its products to footwear stores; sporting goods stores; athletic specialty stores; department stores; skate, tennis, and golf shops; and other retail accounts through NIKE-owned retail stores and Internet Websites (direct to consumer operations), as well as a mix of independent distributors and licensees. The company was formerly known as Blue Ribbon Sports, Inc. and changed its name to NIKE, Inc. in 1971. NIKE, Inc. was founded in 1964 and is headquartered in Beaverton, Oregon. STOCK-AT-A-GLANCE Below is a summary of the major fundamental and technical factors we consider when determining our overall recommendation of NKE shares. It is provided in order to give you a deeper understanding of our rating methodology as well as to paint a more complete picture of a stock's strengths and weaknesses. It is important to note, however, that these factors only tell part of the story. To gain an even more comprehensive understanding of our stance on the stock, these factors must be assessed in combination with the stock’s valuation. Please refer to our Valuation section on page 5 for further information. NIKE INC One Bowerman Drive Beaverton, OR 97005 USA Phone: 503-671-6453 http://www.nikeinc.com Income out of 5 stars weak Measures dividend yield and payouts to shareholders. The company's dividend is higher than 50% of the companies we track. FACTOR SCORE 5.0 Growth out of 5 stars weak Measures the growth of both the company's income statement and cash flow. On this factor, NKE has a growth score better than 90% of the stocks we rate. strong 4.5 Total Return out of 5 stars weak Measures the historical price movement of the stock. The stock performance of this company has beaten 80% of the companies we cover. strong 5.0 Efficiency out of 5 stars weak Measures the strength and historic growth of a company's return on invested capital. The company has generated more income per dollar of capital than 90% of the companies we review. strong 5.0 Price volatility out of 5 stars weak Measures the volatility of the company's stock price historically. The stock is less volatile than 90% of the stocks we monitor. strong 5.0 Solvency out of 5 stars weak Measures the solvency of the company based on several ratios. The company is more solvent than 90% of the companies we analyze. strong 3.0 strong THESTREET RATINGS RESEARCH METHODOLOGY TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates. While our model is quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings. Objective elements include volatility of past operating revenues, financial strength, and company cash flows. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's performance. These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved. Report Date: February 28, 2016 PAGE 3 February 28, 2016 NYSE: NKE NIKE INC Sector: Consumer Goods & Svcs Footwear Source: S&P Annual Dividend Rate $0.64 Annual Dividend Yield 1.02% Consensus EPS Estimates² ($) IBES consensus estimates are provided by Thomson Financial 0.49 2.15 E 2.46 E Q3 FY16 2016(E) 2017(E) Market Capitalization $84.2 Billion 52-Week Range $47.25-$68.19 Price as of 2/25/2016 $62.38 FINANCIAL ANALYSIS NIKE INC's gross profit margin for the second quarter of its fiscal year 2015 is essentially unchanged when compared to the same period a year ago. The company has grown sales and net income during the past quarter when compared with the same quarter a year ago, however, it was unable to keep up with the growth of the average competitor within its industry. NIKE INC has strong liquidity. Currently, the Quick Ratio is 1.76 which shows the ability to cover short-term cash needs. The company's liquidity has increased from the same period last year. During the same period, stockholders' equity ("net worth") has increased by 14.57% from the same quarter last year. The key liquidity measurements indicate that the company is unlikely to face financial difficulties in the near future. STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. To learn more visit www.TheStreetRatings.com. INCOME STATEMENT Net Sales ($mil) EBITDA ($mil) EBIT ($mil) Net Income ($mil) Beta 0.62 Q2 FY15 7,686.00 1,101.00 941.00 785.00 Q2 FY14 7,380.00 1,043.00 889.00 655.00 Q2 FY15 6,116.00 22,583.00 2,171.00 13,405.00 Q2 FY14 4,713.00 19,167.00 1,287.00 11,700.00 Q2 FY15 47.63% 14.32% 12.24% 1.39 16.02% 27.00% Q2 FY14 47.17% 14.13% 12.05% 1.55 15.63% 25.61% Q2 FY15 3.04 0.14 7.00 134.43 Q2 FY14 2.84 0.10 11.00 80.82 Q2 FY15 1,707 0.14 0.45 7.85 NA 8,852,544 Q2 FY14 1,728 0.00 0.37 6.77 NA 4,446,668 BALANCE SHEET Cash & Equiv. ($mil) Total Assets ($mil) Total Debt ($mil) Equity ($mil) PROFITABILITY Gross Profit Margin EBITDA Margin Operating Margin Sales Turnover Return on Assets Return on Equity DEBT Current Ratio Debt/Capital Interest Expense Interest Coverage SHARE DATA Shares outstanding (mil) Div / share EPS Book value / share Institutional Own % Avg Daily Volume 2 Sum of quarterly figures may not match annual estimates due to use of median consensus estimates. This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved. Report Date: February 28, 2016 PAGE 4 February 28, 2016 NYSE: NKE NIKE INC Sector: Consumer Goods & Svcs Footwear Source: S&P Annual Dividend Rate $0.64 Annual Dividend Yield 1.02% RATINGS HISTORY Our rating for NIKE INC has not changed since 9/22/2006. As of 2/25/2016, the stock was trading at a price of $62.38 which is 8.5% below its 52-week high of $68.19 and 32.0% above its 52-week low of $47.25. 2 Year Chart Beta 0.62 BUY: $39.06 $70 Price/Earnings $50 $40 52-Week Range $47.25-$68.19 1 2 3 premium 4 5 NKE 30.36 Peers 29.67 • Average. An average P/E ratio can signify an industry neutral price for a stock and an average growth expectation. • NKE is trading at a valuation on par with its peers. Price/Projected Earnings 1 2 3 premium From Buy To Buy Price reflects the closing price as of the date listed, if available 4 5 NKE 25.34 Peers 26.25 • Premium. A higher price-to-projected earnings ratio than its peers can signify a more expensive stock or higher future growth expectations. • NKE is trading at a premium to its peers. Price/Book 1 2 3 premium 32.19% Buy - We believe that this stock has the opportunity to appreciate and produce a total return of more than 10% over the next 12 months. 35.29% Hold - We do not believe this stock offers conclusive evidence to warrant the purchase or sale of shares at this time and that its likelihood of positive total return is roughly in balance with the risk of loss. 32.52% Sell - We believe that this stock is likely to decline by more than 10% over the next 12 months, with the risk involved too great to compensate for any possible returns. TheStreet Ratings 14 Wall Street, 15th Floor New York, NY 10005 www.thestreet.com Research Contact: 212-321-5381 Sales Contact: 866-321-8726 4 5 Price/Sales 1 2 premium 3 4 5 Price to Earnings/Growth 4 5 discount 1 2 3 premium 4 5 discount NKE NM Peers 1.84 • Neutral. The PEG ratio is the stock’s P/E divided by the consensus estimate of long-term earnings growth. Faster growth can justify higher price multiples. • NKE's negative PEG ratio makes this valuation measure meaningless. Earnings Growth 1 2 3 4 lower 5 higher NKE 22.32 Peers 17.27 • Higher. Elevated earnings growth rates can lead to capital appreciation and justify higher price-to-earnings ratios. • NKE is expected to have an earnings growth rate that significantly exceeds its peers. Sales Growth discount NKE 3.40 Peers 2.75 • Premium. In the absence of P/E and P/B multiples, the price-to-sales ratio can display the value investors are placing on each dollar of sales. • NKE is trading at a premium to its industry on this measurement. 3 NKE 23.78 Peers 26.92 • Discount. The P/CF ratio, a stock’s price divided by the company's cash flow from operations, is useful for comparing companies with different capital requirements or financing structures. • NKE is trading at a discount to its peers. discount NKE 7.94 Peers 6.24 • Premium. A higher price-to-book ratio makes a stock less attractive to investors seeking stocks with lower market values per dollar of equity on the balance sheet. • NKE is trading at a significant premium to its peers. 2 premium discount RATINGS DEFINITIONS & DISTRIBUTION OF THESTREET RATINGS (as of 2/25/2016) 1 Price/CashFlow discount 2015 MOST RECENT RATINGS CHANGES Date Price Action 2/25/14 $39.06 No Change Price as of 2/25/2016 $62.38 VALUATION BUY. NIKE INC's P/E ratio indicates a premium compared to an average of 29.67 for the Textiles, Apparel & Luxury Goods industry and a premium compared to the S&P 500 average of 21.53. For additional comparison, its price-to-book ratio of 7.94 indicates a significant premium versus the S&P 500 average of 2.56 and a significant premium versus the industry average of 6.24. The price-to-sales ratio is well above both the S&P 500 average and the industry average, indicating a premium. Upon assessment of these and other key valuation criteria, NIKE INC proves to trade at a premium to investment alternatives within the industry. $60 2014 Market Capitalization $84.2 Billion 1 2 3 lower 4 5 higher NKE 5.30 Peers 5.86 • Average. Comparing a company's sales growth to its industry helps to determine if the company is adding or losing market share. • NKE is keeping pace with its peers on the basis of sales growth. 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Report Date: February 28, 2016 PAGE 5