What's Going on With Under Armour (UAA) Stock?
Shares of Under Armour UAA jumped over 4% Friday morning to inch near their 52-week high. With no major news to speak of, UAA stock might have climbed as investors ponder what to make of CEO Kevin Plank’s comments earlier in the week when asked if he would ever sell Under Armour.
What Happened?
Under Armour's CEO was asked at an event at the Economic Club of Washington, D.C. earlier this week if he would ever sell the sportswear powerhouse he helped build. “If anyone ever offered me an amount of money greater than what I believed I could get the company to, it wouldn't be my choice but it would be my obligation to make the right decision,” Plank said. “But I have yet to see that happen so we go back to work every day.”
To be clear, Plank did not bring up the topic of a possible Under Armour sale, he simply answered a question in a very diplomatic and pragmatic fashion. It would be the duty of any CEO of a public company to provide the best value to its shareholders. So, this was not shocking news and there have been no reports of offers or deals for Under Armour at the moment.
Still, UAA saw its stock price climb over 4% in early morning trading to touch $24.25 per share, to help it inch just below its 52-week high of $24.69 per share. Shares of Under Armour hovered up around 3% later in the morning.
Under Armour Overview
With all that said, Under Armour stock has soared over 80% in the last year after it tumbled to a nearly five-year low last fall. Despite its climb, the sportswear firm has struggled to adapt to new trends and the direct-to-consumer retail age that Amazon AMZN helped spark.
Under Armour’s Q3 revenue popped just 2% to $1.4 billion and its key North American sales slipped 2% to $1.1 billion. The company did post adjusted quarterly earnings of $0.25 per share, which crushed the Zacks Consensus Estimate of $0.12 per share. But if we look at Under Armour’s most recent quarter as part of the larger picture things appear worse.
North American sales fell 5.3% in the third quarter of 2017. Plus, North American sales, which account for roughly 75% of revenues, dropped in four of the past five quarters.
Furthermore, Under Armour’s direct-to-consumer revenue was flat from the year-ago period. This comes at a time when the industry and its rivals such as Nike NKE and Adidas ADDYY have boosted their online and company-owned store sales in a big way. We should also note that Under Armour has struggled to compete when it comes to that elusive “cool” factor and failed, for the most part, to make a dent in the athleisure industry in order to challenge the likes of Gap GPS and Lululemon LULU.
Bottom Line
Looking ahead, our current Zacks Consensus Estimate is calling for Under Armour’s full-year revenues to jump 4.1% to $5.18 billion. Meanwhile, the company’s adjusted fiscal year earnings are projected to surge nearly 16%. Still, the question is can Under Armour make the significant international expansion it needs and return to growth in its home market in order to sustain its current run of success?
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