Under Armour shares surge after Topping Q4 Estimates

Ajustar Comentario Impresión

As Under Armour Inc (NYSE:UAA) preps to dish out its fourth quarter print this morning, one analyst is setting expectations for earnings to reach the tail-end of the company guide.

Revenue increased 5% to $1.37 billion as North American sales fell 4% and worldwide revenue jumped 47%.

Although some investors are still awaiting any hint of positivity in the earnings of the company, the company has delivered a disappointing earnings report during the third quarter after Under Armour failed to boost its footwear sales.

For the period ended December 31, Under Armour Inc. lost $87.9 million, or 20 cents per share. This result was in line with what Wall Street was expecting.

In the previous quarter, North America sales fell 12% and the downward trend continued in the quarter ended December 31 with a 4% drop. Direct-to-consumer thus represented around 42% of global revenues in the latest period.

Revenue in North America fell by 4 percent, but strong worldwide revenue continued growing 47 percent year over year, which accounted for 23 percent of total revenue in the quarter. Footwear performance in North America also has the analyst anticipating strength, and Kummetz finds himself "encouraged" in better demand for the newest Curry model compared to this time a year ago.

Adjusting for a one-time charge from the new United States tax reforms, the company had breakeven earnings per share - in line with what Wall Street analysts had expected. Under Armour has a twelve month low of $11.40 and a twelve month high of $23.46.

The company sells its products through wholesale channels, including national and regional sporting goods chains, independent and specialty retailers, department store chains, institutional athletic departments, and leagues and teams, as well as independent distributors; and directly to consumers through a network of brand and factory house stores, and Website. Under the plan, approximately $110 to $130 million of pre-tax restructuring charges are expected to be incurred. The majority of these - up to $105 million - will be cash charges to terminate leases and contracts. Operating loss was 37 million dollars.

Investors have been unconvinced, pushing the shares down by a third in the past year and making the company the S&P 500's most shorted stock as of January 31.

Looking ahead, the company expects revenue to be up at a low single-digit percentage rate, reflecting a mid-single-digit decline in North America offset by 25% worldwide growth. EPS in next five year years is expected to touch -2.61% while EPS growth in past 5 year was 13.60% along with sales growth of 26.80% in the last five years.

From Kummetz's perspective, a beat is "likely" considering that the fourth quarter of the year before presents "an easier sales comparison".

But that is a big slowdown from Under Armour's no-so-long-ago explosive growth and any uptick is due to strong sales growth in emerging markets. A company's dividend is mostly determined by its board of directors and it requires the shareholders' approval. China makes up roughly half its total Asia-Pacific sales, which were about $434 million in 2017.

But a string of disappointing results had eroded investor confidence recently, with the stock heavily shorted.

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. Dimensional Fund Advisors LP grew its stake in shares of Under Armour by 159.4% in the 3rd quarter. That's right - they think these 10 stocks are even better buys.

Jason Hall owns shares of Under Armour (A Shares) and Under Armour (C Shares). The Motley Fool has a disclosure policy.