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Should You Buy Under Armour (UAA) Stock Ahead of Q4 Earnings?

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Under Armour (UAA - Free Report) shares popped through late-afternoon trading Friday, just a few days before the sportswear firm reports its fourth-quarter financial results. This means it’s time to see what to expect from Under Armour before the opening bell Tuesday.

Quick Overview

Under Armour has undertaken a huge restructuring plan that could cost the company as much $220 million. The plan has seen it cut its workforce and try to streamline both its go-to-market strategy and product offerings.

Unfortunately for investors, Under Amour’s revamp has not led to the comeback that many might have hoped. In fact, Under Armour announced at its investors day in December 2018—its first in three years—that it expects low single-digit growth annually in North America from 2019 through 2023. This came after Under Armour’s overall Q3 revenues climbed just 2% to reach $1.44 billion.

Plus, UA’s vital North American revenues slipped 1.6% in the third quarter and dropped 5.3% in Q3 2017. Overall, North American sales have now fallen in four of the past five quarters.

Under Armour’s performance stands out in comparison to its sportswear peers Nike (NKE - Free Report) , Adidas (ADDYY - Free Report) , and Lululemon (LULU - Free Report) , who have all experienced far greater revenue growth. The company’s biggest rivals have rolled out successful direct-to-consumer pushes as they shift away from the likes of wholesalers such as Dick’s Sporting Goods (DKS - Free Report) and Foot Locker (FL - Free Report) in an Amazon (AMZN - Free Report) -obsessed age. 

Under Armour’s DTC revenues came in roughly flat last quarter. Meanwhile, its international business has failed to gain the traction Wall Street might have hoped. And the company’s inability to roll out enticing athleisure and non-performance wear offerings has hurt Under Armour as the category continues to expand.

As we touched on at the top, UAA stock jumped 1.7% through late-afternoon trading on Friday to rest at $18.98 a share. This marked a roughly 19% downturn from Under Armour’s 52-week high of $23.28 a share and could set up a solid buying opportunity for those high on Under Armour.

 

 

Q4 Outlook

Moving on, Under Armour’s Q4 revenues are projected to pop by 0.78% to reach $1.38 billion, based on our current Zacks Consensus Estimate. This would make the vital holiday shopping period UA’s slowest top-line growth of 2018 after its revenues climbed 2% last quarter, 8% in Q2, and 6% in the first quarter

At the bottom end of the income statement, Under Armour’s adjusted earnings are projected to jump from neutral, or $0.00 a share in the year-ago period, to $0.04 in the fourth quarter.

Investors should note that the company has seen some mixed earnings estimate revision activity recently. However, the last 30 days have been completely positive, which means at least some analyst are more optimistic about Under Armour’s earnings picture.

 

 

Bottom Line

Under Armour is currently trading at 61.1X forward 12-month Zacks Consensus EPS estimates, which represents a huge premium compared to its industry’s 14.9X average. With that said, Under Armour seems to be more of a trader’s stock than an investor’s at the moment. This means that UAA could see a big post-earnings move in either direction.

Under Armour is scheduled to release its fourth quarter financial results before the opening bell on Tuesday, February 12. Make sure to come back to Zacks for a full breakdown.

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