Shares of Under Armour (UAA - Free Report) climbed after-hours following a 3.50% jump on Monday, one day before the struggling athletic apparel company is set to release its fourth-quarter earnings. But despite this last-minute rally, Under Armour may not be poised to wow many investors when it reports before the opening bell on Tuesday.
As nearly every investor already knows, the Baltimore-based athletic company made history for all the wrong reasons in Q3. Under Armour reported its first-ever sales decline since going public last quarter, after North America sales plummeted 12% and wholesale revenues sunk 13%.
Unlike global rivals Nike (NKE - Free Report) and Adidas (ADDYY - Free Report) , North American sales account for around 75% of its business, while wholesale makes up over 60%—meaning that this performance was devastating for Under Armour.
Investors bought the dip after the initial post-earnings sell-off, which helped Under Armour stock climb 7.76% over the last 12 weeks. However, before today’s gains, shares of UAA had slipped significantly over the last month.
If anything, the recent uptick seems to be tied to either a short-term windfall if the company beats its low expectations tomorrow, or a possible long-term hold based on faith in possible 2018 growth.
What to Expect Tomorrow
Kevin Plank’s company is expected to see its fourth-quarter earnings sink nearly 96% year-over-year to $0.01 per share, based on our Zacks Consensus Estimate. On top of that, Under Armour is projected to see its Q4 sales slip marginally to $1.31 billion in the vitally important holiday quarter.
The company has received some upward earnings estimate revisions for its current quarter. Unfortunately for investors, none of this positive sentiment has come recently. Under Armour’s current Earnings ESP of -63.46% helps demonstrate that the company has fallen out of favor with analysts lately.
Other Scary Fundamentals
Under Armour is currently trading at 63.56x earnings and sports an overall “D” grade for Value in our Style Scores system. In terms of more broad, company-wide problems, Under Armour already reduced its workforce by 2% over the summer—which means this quick money-saving fix could be less likely to occur again anytime soon.
There have also been a massive amount of shakeups at the top. A new COO was brought on over the summer, and David Bergman took over as Chief Financial Officer in December.
Under Armour has also failed to compete in the growing athleisure segment, and its Curry 4 basketball shoes failed to live up to initial sales expectations at the start of the quarter. This led to yet another executive transition.
Under Armour, which is currently a Zacks Rank #3 (Hold), has begun to focus on expanding is business beyond performance footwear and apparel as its much bigger and more successful rivals did years ago. This change doesn’t look like it will be reflected in Q4 results. But investors should note that Under Armour is expected to see both its fiscal 2018 sales and earnings climb roughly 4.70% above its 2017 estimates.
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