Under Armour

Company Description

Under Armour engages in the design, marketing and distribution of apparel, footwear, and accessories. The company offers its apparel in three fit types: compression, fitted, and loose that are designed to be worn in hot, cold, and changing temperatures. Its footwear products include football, baseball, lacrosse, softball and soccer cleats, as well as slides, performance training footwear, running footwear, basketball footwear and hunting boots for athletes. The company was founded in 1996 and is headquartered in Baltimore, Maryland.

UA Produces Positive Surprises for Three Straight Years

Under Armour has beaten the Zacks Consensus Estimate for three years in a row, that’s 12 straight quarters. Over the last six quarters, the company has topped estimates by an average of $0.04 or a little more than 15%. Surprisingly, the average stock price move following those six pervious beats is less than one half of one percent.

Next Expected Earnings Report

Under Armour announced that its next earnings report will be released on Friday, April 20, 2012 before the market opens. The Zacks Consensus Estimate is calling for revenue of $379 million and EPS of $0.24. As a reference point, the same quarter a year ago was reported on April 26, 2011. Under Armour reported revenue of $313 million roughly $20 million more than the Zacks Consensus Estimate. EPS of $0.23 was $0.04 ahead of the estimate or a 21% beat.

Earnings Estimates Bumped Up

Following the September 2011 earnings report, analysts bumped up their earnings estimates for 2012. The Zacks Consensus Estimate for 2012 EPS moved from $2.27 in September 2011 to the current level of $2.33.

Valuations

Under Armour sells premium apparel, and as such, carries a premium valuation in comparison to its peers. The company trades in the "nifty fifty" range for trailing twelve months PE, commanding a 52x multiple compared to the 21x industry average. The forward PE of 40x is more palatable, but still significantly higher than the 18x industry average. Price to book of 7.6x is more than double the industry average of 3.4x and the price to sales multiple is also more than double the industry average.

The Chart

The price and consensus chart shows how the stock traded in line with earnings expectations for throughout most of 2010 and 2011. With the broader market in recovery phase, analysts have boosted future expectations and the stock has yet to catch up. This generally implies that the stock, despite its lofty multiples, is likely undervalued. It appears to be only a matter of time before the stock price catches up to the earnings estimates for 20113 which would entail a healthy advance from current levels. UA is a Zacks #1 Rank (Strong Buy).

Brian Bolan is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Home Run Investor service