Investors Get Ready to Tackle New NFL Season

The kickoff of the next season of America's most-watched professional team sport could create big-league opportunities for investors.

The 2012 National Football League season begins Sept. 5 with a game to be broadcast in prime time between longtime rivals, the New York Giants and Dallas Cowboys. In 2011, nine of the 10 highest-rated U.S. television broadcasts were NFL games. ESPN's "Monday Night Football" was the highest-rated show on cable.

The NFL's 32 teams generate more than $8 billion in revenue a year.

Every team in the league but the Green Bay Packers is privately owned, and even the Packers' shares come with restrictions that essentially bar holders from making profits.

Investors, however, can still benefit from the league's popularity. Here are suggestions on how to play the start of the new NFL season.

Go For the Jersey

The NFL leads all other major U.S. sports in licensed apparel sales, with some $3.5 billion in sales annually, according to the Sporting Goods Manufacturers Association.

Nike's recent deal to become the exclusive supplier of team uniforms could send those figures even higher this year. Some teams, like the Seattle Seahawks, redesigned their uniforms during the off-season and created more alternative jerseys ? a move that could entice shoppers to buy the newest version.

For Nike [NKE? Loading...? ? ? () ? ], the NFL deal is a chance to make inroads in a sport that has been one of its weaker segments, said Sara Hasan, an analyst at McAdams Wright Ragen, a Seattle-based investment firm with about $8 billion in assets under management.

"It's tough to say whether (it) will be enough to move the needle for the company as a whole this year, but it certainly gives them a bigger in into American-style football," she said.

Nike has not disclosed the terms of the NFL deal. Its competitor Adidas [ADDDF? Loading...? ? ? () ? ]said the loss of the NFL contract will contribute to up to $250 million a year in lost revenue for its Reebok division, which had held the uniform license for a decade.

The athletic apparel company's shares are down 10 percent over the last three months and 0.5 percent for the year after the company missed analyst estimates in its most recent quarter. Hasan said the recent declines make the stock more attractive to long-term investors. Nike trades at a price-to-earnings ratio of 20.2 and comes with a dividend yield of 1.5 percent.

Eric Marshall, portfolio manager of the $190 million Hodges Small Cap Fund, said sporting goods supplier Hibbett Sports [HIBB? Loading...? ? ? () ? ]could also benefit. "Any time there's a change, there's the potential for it to translate into apparel sales," he said.

"For an NFL jersey, you can't buy that at the local Super Wal-Mart, so you will go to Hibbetts," Marshall said.

Hibbett has about 830 stores mainly in the Southeast and focuses on smaller towns that could not support a large store like Dick's Sporting Goods, he said.

Marshall expects the company to expand its store count by 5 percent a year and generate 5 percent same-store sales growth in the next several years, combining for about 10 percent revenue growth per year. Hibbett Sports' shares are up 24 percent in 2012 and trade at a price-to-earnings ratio of 22.9.

Dick's Sporting Goods is another retailer benefiting from Nike's NFL deal. On a recent call with analysts, Chief Executive Ed Stack said the new NFL jerseys have drawn more customers into his stores and should be an "additive to our business," particularly in the third and fourth quarters.

Shares of Dick's [DKS? Loading...? ? ? () ? ] are up nearly 35 percent this year, and trade at a price-to-earnings ratio of 23.7. Seventeen of the 28 analysts who track the stock rate it a "strong buy" or a "buy," according to Thomson Reuters data.

Targeting Home Viewers

NFL games are among the few television programs that still prompt large audiences to tune in live. Those viewers could give Comcast [CMCSA? Loading...? ? ? () ? ], majority owner of fourth-place network NBC, and the Walt Disney [DIS? Loading...? ? ? () ? ], owner of ESPN, the biggest lift among the four networks that televise games, analysts said. (Comcast is the majority owner of NBC Universal, the parent company of CNBC and CNBC.com.)

Larry Fried, director of SQAD, an ad-tracking and forecasting company, said the NFL is "essential" to the business model of both NBC and ESPN. NBC, for instance, has "been the lowest-rated of the major networks and the ratings of the NFL is a big magnet to promote their other programming" and could help bring attention to new shows, he said.

Comcast signed a deal in 2011 to pay $950 million per season through 2022 for the rights to air Sunday night games and a new Thanksgiving night game. Thomas Seitz, an analyst at Jefferies, anticipates steady revenue growth for Comcast's NBC-Universal division. He rates Comcast a "buy" and has a price target of $40 for the company. Its shares closed at $33.97 Wednesday and are up about 43 percent in 2012 and trade at a price-to-earnings ratio of 19.5.

ESPN's "Monday Night Football" package, meanwhile, allows the broadcaster to command steeper advertising rates and bigger fees from cable operators, Fried said. That's one reason Disney's cable network division has the highest margins among the company's five major divisions, noted Jeffrey Thomison, an analyst at Hillard Lyons.

Thomison rates Disney a "buy" and has a price target of $63 for the company, which closed at $49.66 Wednesday. Disney's shares are up about 2 percent for the year.

Copyright 2012 Thomson Reuters. Click for restrictions.

Source: http://www.cnbc.com/id/48766279?__source=RSS*tag*&par=RSS

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