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Under Armour (UAA) Stock Up 21% YTD: Will the Rally Continue?

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Under Armour, Inc. (UAA - Free Report) has exhibited a decent run on the bourses so far this year. Thanks to its operational initiatives — strengthening of omni-channel solutions, expanding customer reach and focus on brand innovation — the stock has outperformed the Zacks Textile - Apparel industry. In the said period, shares of this Baltimore, MD-based company have surged about 21.1% compared with the industry’s rally of 10.7%.

Well, Under Armour has been benefiting from its robust operating model and investments across product and marketing. These have favored the company’s second-quarter 2021 results, wherein both the top and the bottom lines beat the Zacks Consensus Estimate and improved year over year. Results reflected strength in both North America and international regions.

Let’s Delve Deeper

Under Armour is focused on strengthening its brand through enhanced customer connections, effective innovations and strict go-to-market process. The company has been making investments in its own stores and digitization to directly reach customers, and selling more inventory at full price. The company has been ensuring an efficient and effective supply chain to proactively meet demand.

The company continues to seek opportunities for increasing its global footprint and market share. Though Under Armour generates a major portion of its revenues from the North America region, it intends to expand business operations to other parts of the world to mitigate the risks stemming from concentration in one geographic region. Revenues in the international unit increased 99.6% (or up 84.1% on a currency neutral basis) to $446 million in the second quarter. Within international business, net revenues from Asia-Pacific and EMEA increased 56.1% and 132.5% to $192.4 million and $207.2 million, respectively. We note that revenues from the Latin America region soared 317.3% to $46.5 million.

 

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In the past few years, Under Armour has been trying to boost its direct-to-consumer business through store expansion initiatives and enhancement of its e-commerce platform. During the second quarter, direct-to-consumer revenues surged 52% to $561 million buoyed by robust growth in owned and operated stores. This followed an increase of 54% in the preceding quarter.

Speaking of innovations, Under Armour successfully introduced the Project Rock collection, Meridian Pant, Infinity Bra, UA SPORTSMASK, the HOVR Sonic, Machina, Phantom 2 and the Breakthru. The company is also optimistic about its new platform, UA Flow. It has been making use of data and analytics capabilities to understand consumer behavior as well as drive brand interest across categories like training and running.

Encouraging 2021 View

Under Armour’s strong brand image and offerings, solid market presence and efficient e-commerce business should continue aiding its performance. The company has provided an optimistic view for fiscal 2021. Management anticipates full-year 2021 revenues to increase at a low twenties percentage rate. This reflects a low twenties percentage growth rate in North America and a mid-thirties percentage growth rate in international business. It envisions adjusted earnings in the band of 50-52 cents a share, suggesting an improvement from a loss of 26 cents in the prior year.

Wrapping Up

Sturdy growth in direct-to-consumer channel, efforts to boost international footing and focus on inventory to lower promotional activity are likely to play a vital role in revenue generation for this Zacks Rank #2 (Buy) company. Markedly, the Zacks Consensus Estimate for the company’s current financial year sales and earnings per share suggests growth of 22.9% and 315.4%, respectively, from the year-ago period.

3 More Stocks Looking Red Hot

The Buckle (BKE - Free Report) has a trailing four-quarter earnings surprise of 42.1%, on average. It presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Children's Place (PLCE - Free Report) has a long-term earnings growth rate of 8%. It currently carries a Zacks Rank #1.

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