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Why Is Under Armour (UA) Stock Down Over 12% Today?
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On Tuesday, Under Armour (UA - Free Report) saw its stock drop about 12% to $32.07 per share as of 11:58 AM CT. This shocking news comes after a positive Q3 earnings report for the sports apparel giant. UA reported earnings of $1.47B, or $0.29 per share, which exceeds analysts expected earnings of $1.45B, or $0.25 per share, for this quarter.
While Under Armour's Q3 earnings might have shown positive gains in sales, there were a few red flags that concerned investors, sending its stock plummeting.
The most troubling news for investors is the drop in gross margin and slow anticipated growth in future revenue. UA experienced a 1.3% drop in its gross margin, falling to 47.5%, compared to 48.8% reported last year. In addition, the company reported an anticipated revenue increase of 20% for 2017 and 2018. While this is a positive expectation, it would be the lowest revenue increase for UA since 2009.
Back in March 2016, UA’s biggest retail partner, Sports Authority, filed for bankruptcy. This resulted in the closing of all stores nationwide by the end of summer. This news has made its mark on UA, shown by its decline in anticipated future revenue.
UA CEO Kevin Plank showed frustration during a conference call, putting some of the blame on the Sports Authority bankruptcy for its immense drop in stock price. However, he is still confident that there will be a turnaround, saying that, "Our demand is still there. This doesn’t mean the demand for the Under Armour brand has disappeared, but it certainly hasn’t reappeared dollar-for-dollar in our distribution."
The hope for Under Armour’s success is heavily based on the marketability and sales of their endorsed athletes. Some notable names include Stephen Curry, Tom Brady, Cam Newton, and many more. The reigning NBA MVP Stephen Curry is set to drop his signature 'Curry 3' shoe, which is anticipated to generate large sales. Plank said, "We’ve always known the size of the prize in footwear is massive," acknowledging the importance of shoe sales in order to keep up with rivals Nike [(NKE - Free Report) ] and Adidas [(ADDYY - Free Report) ].
As of October 25th, UA has a current VGM score of 'F'. Look for an updated Zacks Rank in the upcoming days to see how its earnings results affect its #3 (Hold) ranking.
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Why Is Under Armour (UA) Stock Down Over 12% Today?
On Tuesday, Under Armour (UA - Free Report) saw its stock drop about 12% to $32.07 per share as of 11:58 AM CT. This shocking news comes after a positive Q3 earnings report for the sports apparel giant. UA reported earnings of $1.47B, or $0.29 per share, which exceeds analysts expected earnings of $1.45B, or $0.25 per share, for this quarter.
While Under Armour's Q3 earnings might have shown positive gains in sales, there were a few red flags that concerned investors, sending its stock plummeting.
The most troubling news for investors is the drop in gross margin and slow anticipated growth in future revenue. UA experienced a 1.3% drop in its gross margin, falling to 47.5%, compared to 48.8% reported last year. In addition, the company reported an anticipated revenue increase of 20% for 2017 and 2018. While this is a positive expectation, it would be the lowest revenue increase for UA since 2009.
Back in March 2016, UA’s biggest retail partner, Sports Authority, filed for bankruptcy. This resulted in the closing of all stores nationwide by the end of summer. This news has made its mark on UA, shown by its decline in anticipated future revenue.
UA CEO Kevin Plank showed frustration during a conference call, putting some of the blame on the Sports Authority bankruptcy for its immense drop in stock price. However, he is still confident that there will be a turnaround, saying that, "Our demand is still there. This doesn’t mean the demand for the Under Armour brand has disappeared, but it certainly hasn’t reappeared dollar-for-dollar in our distribution."
The hope for Under Armour’s success is heavily based on the marketability and sales of their endorsed athletes. Some notable names include Stephen Curry, Tom Brady, Cam Newton, and many more. The reigning NBA MVP Stephen Curry is set to drop his signature 'Curry 3' shoe, which is anticipated to generate large sales. Plank said, "We’ve always known the size of the prize in footwear is massive," acknowledging the importance of shoe sales in order to keep up with rivals Nike [(NKE - Free Report) ] and Adidas [(ADDYY - Free Report) ].
As of October 25th, UA has a current VGM score of 'F'. Look for an updated Zacks Rank in the upcoming days to see how its earnings results affect its #3 (Hold) ranking.
Stocks that Aren't in the News…Yet
You are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buys" free of charge. Many of these companies are almost unheard of by the general public and just starting to get noticed by Wall Street. They have been pinpointed by the Zacks system that nearly tripled the market from 1988 through 2015, with a stellar average gain of +26% per year. See these high-potential stocks now >>