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Factors Setting the Tone for Under Armour's (UAA) Q2 Earnings

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Under Armour, Inc. (UAA - Free Report) is likely to register an increase in the top line when it reports second-quarter 2021 numbers on Aug 3, before the market opens. The Zacks Consensus Estimate for revenues is pegged at $1,218 million, indicating a jump of 72.2% from the prior-year reported figure.

The bottom line of this developer, marketer and distributor of apparel, footwear, and accessories is also expected to improve sharply year over year. The Zacks Consensus Estimate for earnings for the quarter under review has been stable at 5 cents in the past 30 days. The figure suggests an improvement from loss of 31 cents reported in the year-ago period.

Notably, this Baltimore, MD-based company has a trailing four-quarter earnings surprise of 286%, on average. In the last reported quarter, the company’s bottom line surpassed the Zacks Consensus Estimate by a significant margin of 300%.

Key Things to Note

Under Armour’s commitment toward product innovation, investments in own stores and digitization to directly reach customers, and selling more inventory at full price are likely to have favorably impacted second-quarter performance. The company has been focusing on strengthening brand through enhanced customer connections and strict go-to-market process as well as expanding direct-to-consumer business. We also note that the company’s international business has been a significant revenue driver.

The company has been taking several actions to stay firm amid the ongoing pandemic. These include strengthening supply chain, managing inventory and containing costs. The company has been also curbing non-essential operating expenses and optimizing capital expenditures.

On its last earnings call, Under Armour projected revenue increase of 70% year over year for the second quarter.

However, management guided gross margin contraction of about 120-140 basis points owing to unfavorable channel mix and higher percentage of off-price sales within the wholesale channel when compared with the last year pandemic-hit quarter. Divestment of the high gross margin business, MyFitnessPal, might have negatively impacted the quarter. Also, higher freight expense due to logistics and transportation challenges remain a headwind.

Under Armour, Inc. Price, Consensus and EPS Surprise

Under Armour, Inc. Price, Consensus and EPS Surprise

Under Armour, Inc. price-consensus-eps-surprise-chart | Under Armour, Inc. Quote

Sneak Peek into Estimates

We note that the Zacks Consensus Estimate for second-quarter revenues for Apparel and Footwear categories are pegged at $728 million and $298 million, indicating growth of 70.9% and 61% year over year, respectively. The consensus estimate for Accessories stands at $112 million, suggesting an improvement of 99.6% from the prior-year quarter.

The Zacks Consensus Estimate for revenues at North America, EMEA, and Latin America segments are pegged at $822 million, $165 million and $28.3 million, respectively. These figures suggest respective increase of 82.8% and 85.1% for North America and EMEA on a year-over-year basis. The same for Latin America indicates growth of 153.9%. The Zacks Consensus Estimate for revenues of $220 million for Asia-Pacific indicates an increase of about 78.5% from the year-ago period.

What the Zacks Model Unveils

Our proven model predicts an earnings beat for Under Armour this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Under Armour has a Zacks Rank #3 and an Earnings ESP of +47.69%.

Other Stocks With Favorable Combination

Here are some other companies you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat:

Foot Locker (FL - Free Report) has an Earnings ESP of +7.06% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Capri Holdings (CPRI - Free Report) has an Earnings ESP of +3.87% and a Zacks Rank #3.

Ralph Lauren (RL - Free Report) has an Earnings ESP of +2.30% and a Zacks Rank #3.