Staying away from Nike as it remains in price discovery mode, says KKM Financial's Jeff Kilburg

Kelly (Host) 00:00.070

well joining us is CNBC contributor and KKM financial founder jeff kilberg jeff it's great to have you here but before i even get in we're gonna start with nike but what does it tell you that we're seeing kind of these huge moves across the landscape i don't know it feels almost

Kelly (Host) 00:15.230

like a more uncertain environment and yet consumer discretionaries outperforming maybe the economy is hanging in pretty well unless you're nike as you can see on the screen there but what do you make of it all

Jeff Kilburg (Founder & CEO) 00:24.430

well kelly you're spot on to talk about the exaggeration or the dispersion you're seeing so i think you're seeing a lot of positions either being repositioned being closed we're in quad witching so everything we're seeing today is being exaggerated look at this morning when they

Jeff Kilburg (Founder & CEO) 00:36.830

jumped and got above sixty eight hundred in the S and P five hundred i think that's all related to some of the earnings and that's why you're seeing some of these moves but i think right now you will see a bit of a set back next week and i think the name like nike i just don't

Jeff Kilburg (Founder & CEO) 00:49.510

know how they get out of their own way you remember kelly we talked about nike a year or two ago you asked me specifically what would be the catalyst for me to buy i said michael jordan coming out of retirement well here we come out of retirement and it's trading in the fifties

Kelly (Host) 01:00.310

right it's actually done so poorly that they obviously even with the new CEO and i gave him a lot of credit he has a tough job to do but let's go through these numbers they beat on the top and bottom lines granted but they had china headwinds they lowered their third quarter

Kelly (Host) 01:13.390

guidance they're expecting a drop in revenues and their gross margin contraction they say is you know in large part due to tariffs this is simply a story that has defined its its growth again

Jeff Kilburg (Founder & CEO) 01:24.550

it does and i don't think it's a new story i know they want to blame the tariffs we hadn't really seen tariffs really materialize into inflation but i think nike is a brand my kids all love nike i see nike everywhere but this stock has really been in just a downturn for the last

Jeff Kilburg (Founder & CEO) 01:38.230

four years if you talk about what's going to be turning around obviously it's profits but i think that china uncertainty specifically on the chinese economy they're struggling there and i think josh brown talked about it earlier but the fact that nike 's not selling shoes with

Jeff Kilburg (Founder & CEO) 01:51.430

their big stars their their big profiles anymore that's a problem for nike so they have to figure out somehow some way to turn the ship around yeah but the end of the day we just want to see profits

Kelly (Host) 02:00.190

and we're not seeing it i think you're making an important point also which is that we haven't really heard a lot a lot about tariffs from a lot of companies this quarter this should have been the time of year that we were hearing the most about it right not during the

Kelly (Host) 02:11.950

implementation or the initial rounds back in april it was supposed to be that remember how worried people were about the holiday season how the shelves were going to be empty how the prices were going to be sky high and now instead of all of that manifesting we haven't really

Kelly (Host) 02:24.830

heard much except all of a sudden from nike so it just makes it a little bit hard to believe that it's a boogeyman for them more so than it is for everybody maybe that's

Jeff Kilburg (Founder & CEO) 02:32.230

why they're getting pounded today down ten percent because the fact that they came up with the excuse for tariffs to pin is kind of pin the tail on the donkey right but i think right here at nike at this level there's no reason to own it you can't try and you know catch a

Jeff Kilburg (Founder & CEO) 02:43.550

falling knife here at kelly so i think nike is really in a predicament but this is four years in a row i'm just down down and down further so i want to stay away from nike i would love to own it because i know my kids love ran a lot of kids across our country of the brand but

Jeff Kilburg (Founder & CEO) 02:56.070

that china uncertainty that's the component that's really missing in all of the numbers which were pretty decent kelly right i mean they did on top of bottom

Kelly (Host) 03:03.070

it wasn't horrible no but the stock to your point we're showing it on the screen there is down fifty seven percent over the past five years all right we're going to stop beating up a nike and move along to fedex because again this should be a barometer kind of a trade of the

Kelly (Host) 03:14.870

economy the shares are fractionally higher they did have stronger than expected results they raised the low end of the full year guidance behrens points out that update implies can have operating profit though will still miss consensus by about five percent again this is coming

Kelly (Host) 03:28.390

off a strong three month stretch as well a bit of a turn around story here they're shedding ground and the rest of it what's the read through for you

Jeff Kilburg (Founder & CEO) 03:34.510

well i own fedex it's an essential name we actually own the essential forty ETF but this is a name that we saw on black friday had just a stellar black friday and it's kind of tailed off since then so yes we're seeing their core business their personal business up twenty four

Jeff Kilburg (Founder & CEO) 03:47.430

percent year over year so that's encouraging but when you talk about some of the freight i know they're talking about spinning that off there's a lot of moving parts there that investors didn't love but this is a name i think you want to own i know it's only fifteen percent off

Jeff Kilburg (Founder & CEO) 03:58.310

its all time high i think it goes back up to three hundred and fifteen dollars where it was in twenty twenty one that could be a retest next year but fedex is a name i think you need to own we talked about the mag seven at nauseam but this is a blue chip boring us economic

Jeff Kilburg (Founder & CEO) 04:12.390

centric name so i think you own it here and on this slight kind of you know reprieve if you will maybe have the opportunity to buy it close to two seventy five versus two eighty

Kelly (Host) 04:20.230

seven right now you know you go well it's trading a fifteen times earnings but nvidia is trading at like twenty which would you rather

Jeff Kilburg (Founder & CEO) 04:26.190

if you if you look at a ford PE you know it's changing pretty historically close to its five year average so it's a little more expensive than it should be but it's also been delivering so i think you have to understand as you're going to the end of the year and you reposition

Jeff Kilburg (Founder & CEO) 04:38.310

and you're figuring out your tradeoffs to set up twenty twenty six is this worth it and this is a name that we do own for that exact reason