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Under Armour’s 3Q EPS Top Estimates On Footwear Demand; Street Says Hold

support@smarteranalyst.com (Ben Mahaney)
·2 min read

Under Armour reported better-than-expected 3Q results on Friday, thanks to demand for its footwear and accessories product lines. The apparel and footwear retailer’s 3Q adjusted EPS grew 13% to $0.26 and came way ahead of analysts’ expectations of $0.04.

Under Armour’s (UAA) revenues of $1.43 billion topped Street estimates of $1.17 billion and came marginally higher than in the year-ago quarter. The company’s top-line performance benefited from a 17% surge in direct-to-consumer revenues, which more than offsets a 7% decline in wholesale revenues.

"Our third-quarter results reflect considerably better than expected performance due to higher demand and our strong execution, especially in North America," said Under Armour CEO Patrik Frisk. "We believe that the critical mass of our transformational challenges is behind us, and we remain sharply focused on operational improvements and financial discipline to accelerate strategies to create sustainable, long-term growth for the Under Armour brand and our shareholders."

Management anticipates revenues to decline at a high-teen percentage rate for the full-year 2020 and low-teen percentage for 4Q. The company projects adjusted loss per share in the band of $0.47-$0.49 for the full-year. (See UAA stock analysis on TipRanks).

In a separate press release, Under Armour disclosed a definitive agreement to sell its MyFitnessPal platform to Francisco Partners for $345 million. The deal amount is significantly lower than $475 million it spent on acquiring the health-tracking app in February 2015. The transaction is anticipated to be completed during the current quarter.

Following its earnings release, Susquehanna analyst Sam Poser raised the stock’s price target to $12 (13.3% downside potential) from $11. However, Poser remains on the sidelines and kept a Hold rating saying that “Despite a healthy 3Q20 EPS & revenue beat and better than expected FY20 guidance, we are concerned that not enough is being done to move through old, stale inventory while in the shadow of the Covid-19 pandemic.”

Currently, the Street is sidelined on the stock. The Hold analyst consensus is based on 10 Holds, 3 Buys and 1 Sell. With shares down nearly 36% year-to-date, the average price target of $13.33 implies further downside potential of about 3.7% to current levels.

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