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Under Armour (UA) Q4 Earnings Miss, Sales Beat Cushions Stock
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Under Armour, Inc. (UAA - Free Report) reported mixed quarterly numbers in fourth-quarter 2017 wherein earnings came in below the Zacks Consensus Estimate but revenues surpassed the same. The company reported break-even adjusted earnings, missing the consensus mark of 1 cent.
Despite the earnings miss, the company’s shares are up nearly 12% during the pre-market trading session. The uptick can be attributed to better-than-expected top-line performance. In the past three months, the company’s shares have surged 17.1% compared with the industry’s gain of 14.6%.
Following robust demand in Europe, the Middle East and Africa (EMEA), Asia-Pacific and Latin America the company’s top line increased 4.6% to $1,365.4 million, beating the consensus estimate of $1,308 million. Currently, the company is keen on expanding footprint and enhancing brand recognition to get an edge. Further, the deal with rising athletes lends Under Armour a suitable platform to showcase its brands.
Quarterly Results in Detail
Apparel sales rose 2.5% to $951.7 million while Footwear net revenues increased 9.5% to $246.2 million in the quarter under review. Net revenues in the Accessories category were up 6.1% to $110.7 million while Licensing revenues rose 10.1% year over year to $32.9 million. Moreover, the company’s Connected Fitness segment reported year-over-year increase of 30.8% to $23.9 million.
North America net revenues dropped 4.5% to $1,024.2 million while the same from EMEA, Asia-pacific and Latin America jumped 45.5%, 55.7% and 36% to $135.3 million, $123.9 million and $58 million, respectively. Also, gross margin contracted 140 basis points to 45% due to aggressive inventory management that overshadowed favorable channel mix.
Other Financial Details
Under Armour ended the quarter with cash and cash equivalents of $312.5 million, up 24.8% from the prior-year period. Total long-term debt was $765 million compared with $790.4 million in the prior-year period. Shareholders' equity at the end of the quarter was $2,018.6 million.
Under Armour, Inc. Price, Consensus and EPS Surprise
Management expects 2018 revenues to increase by low single-digit percentage rate. While revenues from North America are likely to decline by mid-single-digit, international revenues are anticipated to increase above 25%.
The company anticipates adjusted gross margin to increase by nearly of 50 basis points to 45.5%. This improvement can be attributed lower promotional activity, product costs, channel mix as well as variation in foreign currency.
Adjusted operating income is expected to be nearly $130-$160 million. The company projects interest expenses of about $45 million. Capital expenditures are anticipated to be nearly $225 million compared with $275 million in 2017.
The company, which has undertaken restructuring efforts since 2017, projects savings of at least $75 million annually in 2019 and thereafter.
G-III Apparel Group has delivered a positive earnings surprise in the last three quarters.
Delta Apparel has an impressive long-term earnings growth of 15%.
Lululemon Athletica pulled off an average positive earnings surprise of 8.1% in the preceding four quarters.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
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Under Armour (UA) Q4 Earnings Miss, Sales Beat Cushions Stock
Under Armour, Inc. (UAA - Free Report) reported mixed quarterly numbers in fourth-quarter 2017 wherein earnings came in below the Zacks Consensus Estimate but revenues surpassed the same. The company reported break-even adjusted earnings, missing the consensus mark of 1 cent.
Despite the earnings miss, the company’s shares are up nearly 12% during the pre-market trading session. The uptick can be attributed to better-than-expected top-line performance. In the past three months, the company’s shares have surged 17.1% compared with the industry’s gain of 14.6%.
Following robust demand in Europe, the Middle East and Africa (EMEA), Asia-Pacific and Latin America the company’s top line increased 4.6% to $1,365.4 million, beating the consensus estimate of $1,308 million. Currently, the company is keen on expanding footprint and enhancing brand recognition to get an edge. Further, the deal with rising athletes lends Under Armour a suitable platform to showcase its brands.
Quarterly Results in Detail
Apparel sales rose 2.5% to $951.7 million while Footwear net revenues increased 9.5% to $246.2 million in the quarter under review. Net revenues in the Accessories category were up 6.1% to $110.7 million while Licensing revenues rose 10.1% year over year to $32.9 million. Moreover, the company’s Connected Fitness segment reported year-over-year increase of 30.8% to $23.9 million.
North America net revenues dropped 4.5% to $1,024.2 million while the same from EMEA, Asia-pacific and Latin America jumped 45.5%, 55.7% and 36% to $135.3 million, $123.9 million and $58 million, respectively.
Also, gross margin contracted 140 basis points to 45% due to aggressive inventory management that overshadowed favorable channel mix.
Other Financial Details
Under Armour ended the quarter with cash and cash equivalents of $312.5 million, up 24.8% from the prior-year period. Total long-term debt was $765 million compared with $790.4 million in the prior-year period. Shareholders' equity at the end of the quarter was $2,018.6 million.
Under Armour, Inc. Price, Consensus and EPS Surprise
Under Armour, Inc. Price, Consensus and EPS Surprise | Under Armour, Inc. Quote
2018 Guidance
Management expects 2018 revenues to increase by low single-digit percentage rate. While revenues from North America are likely to decline by mid-single-digit, international revenues are anticipated to increase above 25%.
The company anticipates adjusted gross margin to increase by nearly of 50 basis points to 45.5%. This improvement can be attributed lower promotional activity, product costs, channel mix as well as variation in foreign currency.
Adjusted operating income is expected to be nearly $130-$160 million. The company projects interest expenses of about $45 million. Capital expenditures are anticipated to be nearly $225 million compared with $275 million in 2017.
The company, which has undertaken restructuring efforts since 2017, projects savings of at least $75 million annually in 2019 and thereafter.
Zacks Rank & Stock to Consider
Under Armour carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the retail sector are G-III Apparel Group (GIII - Free Report) , Delta Apparel (DLA - Free Report) and Lululemon Athletica (LULU - Free Report) . All the three of them carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
G-III Apparel Group has delivered a positive earnings surprise in the last three quarters.
Delta Apparel has an impressive long-term earnings growth of 15%.
Lululemon Athletica pulled off an average positive earnings surprise of 8.1% in the preceding four quarters.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>