Markets are gearing up for the Big Dance. I’m talking about March Madness here of course. After all, the NCAA Men’s Basketball season, with sixty eight teams, six rounds and one winner, is a heady mix.
This basketball tournament, which grips the national sports psyche from the middle of March through the first week of April, draws more number of people than the voter count for either Donald Trump or Hillary Clinton. In fact, Warren Buffet had said that the tournament is so notoriously difficult to predict that he is willing to give $1 million every year for life to any Berkshire Hathaway Inc. employee who picks the top 16 accurately.
Meanwhile, like fans keep a close watch on the tournament, investors keep an eye on stock market movements. This is because the stock market tends to perform well during this phase. Now, that may be a coincidence or maybe not. But, there are a handful of stocks that do gain in a big way. Let us take a look at those.
NIKE, Inc., the athletic apparel giant, manufactures jerseys, shoes and warm-ups for 40 of the 68 teams, representing 60% of the tournament’s participants.
Naturally, millions of viewers who are watching the tournament get to see the Nike brand everywhere, which boosts Nike’s nearly $40 billion revenue base. Meanwhile, the company’s initiatives toward product innovation and expansion, by the way, are helping it to remain on the winning course.
The stock currently has a Zacks Rank #2 (Buy). In the past 60 days, Nike has seen one earnings estimate move up, while none moved down for the next year. The Zacks Consensus Estimate for earnings rose 0.6% in the same period.
The company’s expected earnings growth rate for the next quarter is 18.8%, higher than the Shoes and Retail Apparel industry’s projected gain of 6.2%. The company has outperformed the broader industry in the past year (+32.1% vs +26.1%).
If Nike is the king, Under Armour, Inc. is the dark horse. Under Armour was only sponsoring jerseys of six of the 68 team way back in 2015. But, in 2017, the number climbed to 12. And this year, it’s widely believed that the number could be even bigger.
An Under Armour school, Texas Tech is a top 10 team, while both Maryland and Wisconsin are top 20 teams and Cincinnati is a top 25 team. Thus, Under Armour has four teams that could seriously make an impact, which in turn could boost revenue growth.
The stock currently has a Zacks Rank #2. In the past 60 days, Under Armour has seen seven earnings estimates move north, while none moved south for the current year. The Zacks Consensus Estimate for earnings rose 3% in the same period.
The company’s expected earnings growth rate for the current year is 25.9%, higher than the Textile - Apparel industry’s projected gain of 23%. The company has outperformed the broader industry in the past one-year period (+37.5% vs +17.6%).
CBS Corporation has a lot to gain through ad revenues. The company mainly telecasts the tournament which attracts millions of viewers. In fact, viewership increases as the tournament approaches an end, averaging a staggering 15 million-plus viewer.
This time, the tournament is expected to witness huge viewership, given the plethora of talents in college basketball and the hype surrounding college basketball’s star player, Zion Williamson.
The stock currently has a Zacks Rank #3 (Hold). The company’s expected earnings growth rate for the current year is 9.1%, in contrast to the Broadcast Radio and Television industry’s projected decline of 7.2%.
Not all the 63 games of the tournament are shown by CBS. Some are, in fact, aired by Turner Sports, which is owned by AT&T Inc.
Turner Sports, through TBS, TNT and truTV, air many games in the first and second rounds and some in the Sweet 16 and Elite 8. These games also attract a lot many viewers, and represent a sizable ad revenue opportunity for AT&T.
The stock currently has a Zacks Rank #3. The company has outperformed the Wireless National industry so far this year (+7.5% vs 6.3%).
Thanks to the emergence of streaming apps, it can be assumed that most of the consumers are watching the tournament at homes and not at sports bars. And watching the tournament takes time, during which food does become a necessity. Easy to consume foods are the most sought after and in that category, Domino’s reigns supreme. Thus, the tournament should surely give shares of Domino's Pizza, Inc. a boost, especially in its next earnings.
The stock currently has a Zacks Rank #3. The Zacks Consensus Estimate for its current-quarter earnings has moved up 0.9% in the past 90 days.
The company’s expected earnings growth rate for the current year is 11.2%, more than the Retail - Restaurants industry’s estimated gain of 4.5%. The company has outperformed the broader industry in the past two-year period (+32.9% vs +31.9%).