How is Under Armour (UAA) Stock Placed Ahead of Q1 Earnings?
Under Armour, Inc. UAA is scheduled to report first-quarter 2018 results on May 1, before the opening bell.
The question lingering in investors’ minds is whether this marketer and distributor of apparel, footwear and accessories will be able to deliver a positive earnings surprise in the quarter to be reported. Let’s see how things are shaping up prior to this announcement.
What to Expect?
The Zacks Consensus Estimate for the quarter is pegged at a loss of 5 cents, wider than the loss of a penny reported a year ago. Analysts polled by Zacks expect revenues of $1.12 billion, almost flat with the year-ago quarter figure.
Under Armour, Inc. Price, Consensus and EPS Surprise
Under Armour, Inc. Price, Consensus and EPS Surprise | Under Armour, Inc. Quote
Factors at Play
For the first quarter, management expects revenues to decline or remain flat in comparison to the year-ago quarter. Further, the company envisions loss per share in the range 6-7 cents on the back of adjusted operating loss of nearly $15 million.
We believe that the prolonged weakness in the North American business is likely to tarnish first-quarter results. The company has been reporting sluggish sales from the region since fourth-quarter 2016. In fourth-quarter 2017, sales in North America declined 4.5%. The dismal show can be attributed to bankruptcies, store closures, decreased productivity and demand along with shift in fashion preference.
Additionally, gross margin has been consistently shrinking in the past few quarters. In fourth-quarter 2017, the metric contracted 140 basis points (bps) to 45% following a decline of 130, 190 and 70 bps in the third, second and first quarter, respectively. Management expectsgross margin to remain flat in the first quarter of 2018.
Further, Under Armour has been struggling to keep interest expenses in check. In fourth-quarter 2017, the company’s interest and other expenses rose to nearly $12 million in comparison with $10 million in the prior-year quarter. Further, it anticipates interest and other expenses to rise around $45 million in 2018 from $38.2 million last year.
Nevertheless, Under Armour’s sustained focus on brand development, restructuring plans, expansion of direct-to-consumer and technology-based fitness businesses seem favorable. The company’s continuous efforts to innovate are also full of promise.
What Does the Zacks Model Say?
Our proven model does not conclusively show an earnings beat for Under Armour this quarter. This is because a stock needs to have both a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP for this to happen.
Under Armour has an Earnings ESP of +7.22%. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
However, the company has a Zacks Rank #4 (Sell). Please note that we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement.
Stocks With Favorable Combination
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:
Guess', Inc. GES has an Earnings ESP of +16.18% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Michael Kors Holdings Limited KORS has an Earnings ESP of +6.69% and a Zacks Rank #2.
Ralph Lauren Corporation RL has an Earnings ESP of +2.92% and a Zacks Rank #2.
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Under Armour, Inc. (UAA) : Free Stock Analysis Report
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