Earnings Preview: Under Armour

Under Armour, Inc. (UA - Snapshot Report), one of the leading developers, marketers and distributors of branded sports apparel, footwear and accessories, is slated to report its first-quarter 2012 financial results on April 20, 2012. The current Zacks Consensus Estimate for the quarter stands at 24 cents per share, indicating an estimated year-over-year increase of about 4.3%. Revenue, as per the Zacks Consensus Estimate, is $379 million.

Fourth-Quarter Synopsis

Under Armour’s quarterly earnings of 62 cents a share exceeded the Zacks Consensus Estimate by a couple of cents, and soared 40.9% from 44 cents earned in the prior-year quarter.

Net revenue for the quarter came in at $403.1 million, up 33.9% from the year-ago quarter, and was marginally ahead of the Zacks Consensus Estimate of $402 million.

Earnings Estimate Revisions - Overview

Estimates haven’t moved for the upcoming quarter, reflecting that the analysts covering the stock kept their estimates intact in the absence of any major news having a direct or an indirect impact on the estimates.

Agreement of Estimate Revisions

We do not see any major estimate revisions at this point. Among the 24 analysts covering the stock, none of them have revised the estimate upward or downwards in the last 30 days. For fiscal 2012, one analyst revised the estimate upwards, while none lowered the same.

Magnitude of Estimate Revisions

The Zacks Consensus Estimate for the quarter remained stable over the last 30 days. The analysts remain constructive on the stock based on the company’s growth potential and brand strength.

Positive Surprise History

With respect to earnings surprises, Under Armour has topped the Zacks Consensus Estimate over the last four quarters in the range of 1.2% to 33.3%. The average remained at positive 14.7%, indicating that the company has surpassed the Zacks Consensus Estimate by the same magnitude in the trailing four quarters.

Our Take

Under Armour maintains strict control over its brand image, with an in-house marketing and promotions department, engaged in designing and advertising while cautiously controlling the distribution of its products.

The company offers substantial growth opportunities in the long term through geographic, product/category and direct-to-consumer expansion. Based on Under Armour’s well established brand for technical product, we expect the company to continue to benefit from longer-term shifting trends toward performance based products within the industry.

Further, Under Armour has significant top-line potential in the long term given its loyal customer base as well as relatively small revenue base.

Currently, Under Armour, which competes with Nike Inc. (NKE - Analyst Report) and Columbia Sportswear Company (COLM - Snapshot Report), holds a Zacks #1 Rank that translates into a short-term Strong Buy rating.