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Under Armour (UAA) to Report Q1 Earnings: What's in Store?

Zacks Equity Research

Under Armour, Inc. UAA is scheduled to report first-quarter 2019 financial numbers on May 2, before the opening bell. We note that the bottom line of this Baltimore, MD-based company surpassed estimates in three of the trailing four quarters, with an average positive surprise of 83.3%.

In the last reported quarter, its top and bottom lines surpassed the Zacks Consensus Estimate and also improved year over year. We note that the Zacks Consensus Estimate for the bottom line for the first quarter of 2019 showcases break-even results, while the top line is pegged at $1,188 million almost flat from the year-ago period.

Here’s What Management Had Earlier Guided

Management had earlier projected first-quarter 2019 revenue to be flat to down marginally with bottom line projected to be a loss of 1 cent. The company had earlier highlighted that revenues from DTC channel are likely to be soft on account of less promotional activity, fewer Brand House stores, and the shift in Easter.

We also observed that revenues from Latin America tumbled 15.1% during the fourth quarter of 2018 owing to change in the business model in Brazil that involves transition to a licensing and distributor model from an owned subsidiary. This change is also likely to impact revenues.

Under Armour envisions mid-single-digit decline in revenues from the North America region. Sales decline in North America has been a major concern for investors in the past few quarters. However, management had earlier hinted at a low double-digit increase in the international region. Gross margin is projected to expand about 20-30 basis points with operating income expected to be about $5 million.

Under Armour, Inc. Price, Consensus and EPS Surprise

Under Armour, Inc. Price, Consensus and EPS Surprise | Under Armour, Inc. Quote

A Sneak Peek into the Fundamentals

Under Armour is gaining from its focus on brand development and the expansion of DTC and technology-based fitness businesses. Furthermore, apart from rolling out e-commerce platforms, the company continues to look for opportunities to expand its presence worldwide.

In the process, it opened factory and brand stores in Canada and China, and provided franchise licenses in many nations. The company is expanding its DTC business in the U.K., Germany and the Netherlands. Further, it rolled out e-commerce platforms in countries like Mexico, Australia, New Zealand and Chile.

With rising wellness and health consciousness, sports apparel makers are entering into the fitness gadgets’ business and other tracking platforms to attract customers. Notably, the company’s acquisition of MapMyFitness, Endomondo and MyFitnessPal are in tune with the strategy of expanding its reach in the fitness space. Also, management is impressed with the popularity of UA HOVR. Currently, Under Armour is banking on three platforms — HOVR, Charge and Micro G — to fortify its footprint in this space.

Backed by these tailwinds, shares of this Zacks Rank #3 (Hold) company have increased approximately 29% so far in the year compared with the industry’s growth of 31%.

3 Stocks That Looks Hot

G-III Apparel GIII outperformed the Zacks Consensus Estimate by a wide margin in the trailing four quarters. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ralph Lauren RL has a long-term earnings growth rate of 10.3% and a Zacks Rank #2 (Buy).

Columbia Sportswear COLM has a long-term earnings growth rate of 8.9% and a Zacks Rank #2.

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