Under Armour Earnings Top; Stock Nears Buy Point Despite Weak Guidance

Under Armour (UAA) reported better-than-expected fourth-quarter earnings and sales early Tuesday, but the athletic apparel giant gave weak revenue guidance for the current quarter. After opening lower, Under Armour stock reversed higher to near a buy point.


Under Armour Earnings

Estimates: Analysts expected Under Armour earnings per share of four cents, while it broke even last year. Revenue was seen climbing 7% to $1.38 billion according to Zacks Investment Research.

Results: Under Armour earnings rose to 9 cents a share. Revenue came in at $1.39 billion. North America sales fell 6% while international sales jumped 24%. Gross margin of 45.1% topped views. Inventory sank 12% to the lowest in almost two years.

Outlook: Under Armour reiterated its 2019 financial targets from December, predicting 3%-4% revenue growth and EPS of 31-33 cents. But Under Armour sees Q1 revenue flat to slightly down vs. estimates for a 2% gain. It expects North America revenue to fall in the mid-single digit range.

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Under Armour Stock

Shares, fell fell as low as 19.75 soon after the stock market open, rose 1.8% to 21.17 Under Armour stock is in a 10-week cup-with-handle base, MarketSmith analysis shows. However it has been struggling for momentum, with the relative strength line rangebound for more than six months. Shares are still well below their all-time high of 2015, just under the 53 price level.

A positive sign for Under Armour stock is the fact it is trading above its 50- and 200-day moving averages. The price was also up in above average volume last week, another bullish indicator.

Under Armour stock does not qualify as a CAN SLIM stock. It currently has poor fundamentals, which is why its IBD Composite Rating is a lowly 36. The IBD Stock Checkup Tool shows its all-important Earnings Per Share Rating of 23 is well deserved, as it boasts a three year EPS growth rate of -35%. Sales growth is also lagging, increasing by just 10% over the past three years.

Among rival stocks Nike (NKE) rose 0.6%, with the Dow Jones component still in a buy zone. Adidas (ADDYY) was up 0.95. Skechers (SKX) fell 0.1%.

Lululemon Athletica (LULU) jumped 2.7% to 153.62, clearing a 152.91 cup-with-handle buy point.

Analyst Cautious On Under Armour Stock

Wedbush Securities analyst Christopher Svezia rated Under Armour stock as neutral with a 20 target heading into earnings but warned it faces challenges at home.

“It seems that there is a meaningful hill to climb to reestablish brand heat in North America, especially given consolidation in the retail market against much stronger peers than 2-3 years ago (Nike, adidas, Puma, Vans, Champion, and more),” Svezia said in a research note. “Valuation also appears more than fair at current levels  while the company is only in the early innings of a turn-around.”


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The post Under Armour Earnings Top; Stock Nears Buy Point Despite Weak Guidance appeared first on Investor's Business Daily.

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