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It has been about a month since the last earnings report for Under Armour (UAA). Shares have lost about 11.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Under Armour due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Under Armour Beats on Q1 Earnings, Raises '21 View
Under Armour, reported stellar first-quarter 2021 results that gained from strength in both North America and international regions as well as robust e-commerce sales. Markedly, both the top and the bottom lines not only surpassed the Zacks Consensus Estimate but also improved year over year. This Baltimore-based company's upbeat performance highlighted its improved operating model and investments that helped meet strong demand. The stronger-than-anticipated results prompted management to raise full year view.
Let’s Delve Deep
Under Armour reported adjusted earnings of 16 cents a share that fared far better than the Zacks Consensus Estimate of 4 cents. The bottom line also showcased a sharp improvement from a loss of 34 cents reported in the year-ago period.
Meanwhile, net revenues of $1,257.2 million comfortably outpaced the Zacks Consensus Estimate of $1,124 million, thus marking the fourth straight beat. The top line surged 35.1% on a year-over-year basis. While wholesale revenues rose 35% year over year to $800 million, direct-to-consumer revenues increased 54% to $437 million buoyed by 69% jump in e-commerce sales.
By product category, Apparel revenues jumped 35.4% year over year to $810 million, while Footwear revenues increased 47.4% to $309 million. Revenues from Accessories category surged 73.3% to $117.4 million. Meanwhile, Licensing revenues rose 8.6% to $21.7 million.
Net revenues from North America increased 32.3% to $805.7 million. Revenues from international business grew 57.8% (or up 50.2% on a currency neutral basis) to $452 million. Within international business, net revenues from Asia-Pacific and EMEA increased 119.7% and 40.6% to $210.2 million and $193.9 million, respectively. We note that revenues from Latin America region tumbled 9% to $48.3 million.
The company’s gross margin expanded 370 basis points to 50% owing to benefits from channel mix, supply chain initiatives and pricing.
Other Financial Details
Under Armour ended the quarter with cash and cash equivalents of $1,348.7 million, long-term debt (net of current maturities) of $1,009.9 million and total stockholders' equity of $1,770.2 million.
Management now anticipates full-year 2021 revenues to increase at a high-teen percentage rate, up from the prior projection of high-single-digit percentage rate increase. This reflects a high-teen percentage growth rate in North America and low thirties percentage growth rate in the international business.
The company now envisions adjusted earnings in the band of 28-30 cents a share, up from previous expectation of 12-14 cents a share.
Under Armour anticipates full year gross margin to be up about 50 basis points when compared with the prior year adjusted gross margin of 48.6%. Management highlighted that benefits from pricing and supply chain efficiency will largely be offset by the impact of the divestment of the high gross margin business, MyFitnessPal. The company guided adjusted operating income between $230 million and $240 million compared to the previous expectation of $130-$150 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 130.17% due to these changes.
Currently, Under Armour has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Under Armour has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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