March Madness, slam dunk for stocks?

Trevir Nath, Director of Content

March Madness has begun and already lived up to the hype we expect each year. In the first week of play we've seen several big upsets, yet again ruining the chance of a perfect bracket. However, the tournament is much more than filling out a bracket and hoping for the best. Americans have become so engulfed in the madness that missing a game is no longer an option. Whether that means taking a three-hour lunch or streaming every game at your desk, there are an infinite number of ways to tune in for the action. This has been beneficial not only to the NCAA but also to restaurants, apparel, and tech companies that cater to this crowd.

Restaurants like Buffalo Wild Wings tend to attract the largest crowds during mainstream sporting events. In fact, March Madness is so profitable that BWLD categorizes special events separately on its financial statements. The first quarter tends to be the most profitable since it coincides with both the Super Bowl and NCAA tournament. Moreover, the company is also an official partner of the NCAA, using this stage to launch advertisements and new campaigns. Buffalo Wild Wings appears to be in good shape ahead of its first quarter with early indications from the Estimize community projecting a 19% increase in earnings and 21% revenue growth.

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Meanwhile, technology has never made it so easy to catch every bit of the action. Whether it's a close game, upset, or full out onslaught, social media is continually updating to reflect significant news. Last year, the tournament proved especially important for Twitter, which attracted a flood of tweets and users, despite its recurring user growth problems. This might not be enough to save Twitter's waning business but will certainly provide a boost to the volume of tweets in the first quarter, a number that has been declining.

March Madness is also prime time for schools and fans to showcase their new NCAA inspired t-shirts and jerseys, displayed with subtle branding from Nike, Adidas and Under Armour. Leading the way, Nike represents 43 schools in the tournament this year with 2 of them wearing the elite Jordan Brand. Just behind Nike, Adidas and Under Armour have 15 and 10 schools, respectively, wearing their products. Nike, Under Armour and Adidas not only cash in on merchandising rights but also gain broad exposure to millions of viewers and fans. The increased publicity often attracts even the most casual fans to make a purchase. Despite Nike's dominance, the three brands seemingly battle year after year to sign top schools.

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For Nike and Under Armour, special events like the tournament have been pivotal to each of their growth strategies. In the past year, both companies have delivered double digit year over year comparisons in each of the past 4 quarters. Adidas on the other hand has lost its market position as second fiddle to Under Armour. For that reason, it is important that Adidas capitalizes on big sporting events to reposition itself as a major player in the United States.

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Nike's mixed results yesterday do not reflect March Madness, as the quarter closed on February 29. In its fiscal third quarter, the sportswear giant beat the Estimize consensus data by 5 cents on the bottom line but missed its revenue estimates by $176 million. The quarter was highlighted by strong year over year growth in its core North America and China businesses while future order growth beat expectations. Still, shares of fell 6% in after hours trading reflecting a lingering concern over weak consumer spending.

However, the biggest winners of the bunch, of course, are the networks that broadcast the games, CBS and Time Warner. Year after year, the two networks commit billions of dollars to televise 67 of the most thrilling basketball games of the year. Broadcasting the tournament is increasingly profitable for both CBS and Time Warner, as advertising costs outpace the cost of TV rights. Moreover, prime time sports have subdued the wrath of streaming services, making the tournament that much more important to both networks. That said, earnings haven't reflected the popularity of March Madness, with both companies slumping during quarters the tournament takes place. We won't get results for those two names until late April and early May.

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March Madness has become more important in recent years. For many companies these sporting events garner broad media exposure, but more importantly, drives sales. Whether that's food sales, merchandising or broadcast rights, March Madness has gone beyond filling out a bracket and skipping work.

How do you think these names will report this week? Be included in the Estimize consensus by contributing your estimates here!