Nike (NKE)

Sports apparel and footwear giant Nike has been a popular stock for investors. Over the past five years, shares have climbed more than 140%.

Management is also returning cash to investors. In the most recent quarter, Nike paid out $484 million in dividends to shareholders — up 12% from the prior-year period.

Those dividends are backed by a profitable business. For the quarter, Nike earned a profit of $1.4 billion. Meanwhile, its revenue grew 5% year over year to $10.9 billion.

Morgan analyst Kimberly Greenberger is confident in Nike’s ability to deliver strong earnings despite rising wages in the U.S.

“We expect Global Brands to be relatively insulated from wage inflation given lower store counts and high revenue penetration in the wholesale & eComm channels,” she writes. “Additionally, revenue exposure to international geographies could help alleviate pressures from US wage inflation.”

Greenberger has a price target of $192 on Nike — about 44% above where the stock sits today.

An app called Acorns automatically rounds up purchases made on your credit or debit card to the nearest dollar and places the excess "change" into a smart investment portfolio. You get $10 immediately from your first investment.

Get $10

Knight-Swift Transportation Holdings (KNX)

Knight-Swift is in the freight transportation business, providing multiple truckload transportation and logistics services throughout North America.

Having Knight-Swift on this list may seem counterintuitive because pay raises have been common in the transportation industry amid the driver shortage. But Morgan analyst Ravi Shanker sees the company coming out just fine.

“While TL driver wages have seen some of the sharpest increases over the last two years, KNX's relatively low exposure to wage-driven costs as a % of revenues and remarkable pricing power (evidenced by EBIT growth 2x the group average) should position them well to navigate wage inflation,” he says.

“We believe scale and exposure can make them the biggest beneficiary of any additional upside from the cycle.”

Knight-Swift is already delivering rapid growth in this cycle. In Q4 of 2021, consolidated revenue rose 38.8% year over year while consolidated operating income shot up 76%.

The company hasn’t been an investor favorite lately as shares are down about 25% year to date. But Shanker sees a rebound on the horizon. His price target of $85 implies a potential upside of 86%.

Rockwell Automation (ROK)

More and more companies are choosing to automate their processes in the face of rising labor costs. And that means a significant tailwind for Rockwell Automation — a global leader in industrial automation and digital transformation.

“We view Rockwell as a prime beneficiary of secular investments driven by a multitude of catalysts converging (supply chain constraints, labor shortages, near-shoring) as technology is improving and paybacks are shortening,” writes analyst Josh Pokrzywinski.

He adds that because Rockwell can also increase automation in its own factories, the stock is “fairly insulated from higher wages.”

Rockwell shares are down 20% in 2021. But the company recently achieved record quarterly orders of $2.5 billion, a year-over-year increase of more than 40%.

Rockwell’s improvement should give contrarian investors something to think about. Pokrzywinski has a price target of $395 on Rockwell shares — 42% higher than the current levels.

Most people don't realize that with the right moves, you can become a millionaire — it's not a question of "if," it's a question of "when."

Read More

More from MoneyWise

Never overpay on Amazon again

Make sure to price-check online purchases with the help of Capital One Shopping. It’s totally free to use and takes less than a minute to set up.

Last year the service saved its customers over $160 million, and with just a few clicks you can start saving, too.

Download Capital One Shopping today and stop paying more than you have to for the exact same stuff.

About the Author

Jing Pan

Jing Pan

Investment Reporter

Jing is an investment reporter for MoneyWise. Prior to joining the team, he was a research analyst and editor at one of the leading financial publishing companies in North America. An avid advocate of investing for passive income, he wrote a monthly dividend stock newsletter for the better half of the past decade. Jing holds a Master’s Degree in Economics and an Honours Bachelor of Science Degree, both from the University of Toronto.

What to Read Next

17 million Americans are missing out on free money — make sure you aren’t one of them

New legislation will help workers who aren’t yet cashing in get what they’re owed.

How can I stop the pain and make money in this nightmarish market? BofA says this is the ‘best hope’ for bulls in 2022

Companies could be returning trillions to shareholders. Here’s how to accept it.

Disclaimer

The content provided on MoneyWise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter.