Michael Phelps' Sponsors Are Set to Win Gold
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All he needs before every race is his music and no dandruff...at least that is what Procter and Gamble (NYSE: PG) told us about a million times throughout the last few weeks. Michael Phelps, the man with 18 gold medals over the last 3 Summer Olympics, not only benefits himself by winning almost every race but also helps the massive companies sponsoring him.
Procter and Gamble, a Buffett and Ackman fav, could see a jump in sales after these games are done. They spent millions on sponsoring athletes and the games in general. They celebrated Moms in some ads and showed Phelps shampooing with Head and Shoulders in others. The P&G brands like Crest, Pantene, and Cover Girl, will see a nice boost in recognition and brand loyalty. With a quarterly increase in earnings of 44% last quarter, maybe they don't need too much help. It's stock is up 4% since the first day of the Olympics.
A strange thing about sponsoring an Olympic athlete is that you can't show your superstar wearing your gear during the Olympics unless you also sponsor the Olympic games. This was the case for Under Armor (NYSE: UA), one of Phelps' biggest sponsors. Certainly after the games Under Armour will see a boost as millions associate the Olympian and his gold medals with their sporting goods. They already had earnings growth last quarter. Over the last year Under Armour stock has increased 70% and investors still see room to grow given the trailing PE ratio of about 60.
During the Olympics Phelps had to wear the gear of Under Armour's rivals. Team USA has Nike (NYSE: NKE) as their official sponsor so Phelps had to follow suit. Nike received the privilege to clothe some of the greatest athletes in the world and then had millions around the world see Olympians win gold in their Nike spandex suits and track suits. Nike has a great business with profit margins of 9% and return on equity of 21%, both better than Under Armour. Stock performance for Nike since the beginning of the games is about 2% whereas Under Armour stock has increased by 4%.
Other brands that receive the honor of associating themselves with the Michael Phelps are Visa (NYSE: V) and AT&T (NYSE: T). Visa is an official commercial partner for the London 2012 Olympic Games. Coming off an amazing 53%+ gain in the last 52 weeks in the market, Visa will likely see another boost in share and brand value. The speedy man in the Speedo isn't the worst guy to back for promoting your brand. AT&T knows this too. Although not an official Olympic sponsor, their association with Phelps could push up their almost "mere" $4 billion in quarterly net income. Both Visa and AT&T have stock increases of about 5% since the beginning of the Olympics.
Phelps is an excellent horse to back when it comes to the Olympics. Medals galore, publicity 24/7, and millions of little kids wanting to look and be just like Michael. Although Michael says this is his last Olympics can he resist the temptation of dipping into the deep pockets of these multinationals once again? I don't think these companies would mind another go.
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