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Under Armour (UAA) Stock Falls Despite Q3 Earnings Beat
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Shares of Under Armour, Inc. (UAA - Free Report) are down roughly 13% during pre-market trading session, in spite of the company reporting better-than-expected third-quarter 2019 results. We note that a federal accounting probe and trimming of 2019 revenue growth forecast hurt investor sentiment.
This athletic apparel maker reported quarterly earnings of 23 cents a share that surpassed the Zacks Consensus Estimate of 18 cents but declined 8% from the year-ago figure of 25 cents. Lower revenues and higher SG&A expenses might have impacted the bottom-line performance of this Zacks Rank #3 (Hold) stock.
Nonetheless, this was the fifth straight quarter of bottom-line beat. Meanwhile, shares of this Baltimore-based company have increased 19.7% so far in the year compared with the industry’s growth of 11.4%.
Net revenues fell 0.9% (or flat on a currency neutral basis) to nearly $1,429.5 million but came ahead of the Zacks Consensus Estimate of $1,408 million, after missing the same in the preceding quarter.
Under Armour’s third-quarter results came in better than management’s expectations of 2-3% revenues decline and earnings of 17-18 cents a share.
Under Armour, Inc. Price, Consensus and EPS Surprise
We note that while direct-to-consumer revenue (represents 32% of total revenues) fell 1% to $463 million, wholesale revenue declined 2% to $892 million.
Apparel revenues inched up 0.7% year over year to $985.6 million, while Footwear revenues decreased 12% to $250.6 million. Revenues from accessories category increased 1.7% to $118.2 million. Meanwhile, Licensing revenues declined 5.6% to $29.6 million, whereas the company’s Connected Fitness segment reported an increase of 22.3% to $39.3 million.
Net revenues from North America fell 4.1% to $1,015.9 million. Remarkably, international business continued to witness decent growth, rising 4.8% (or up 8% on a currency-neutral basis). Within international business, net revenues from EMEA and Asia-Pacific regions grew 9% and 3.7% to $161 million and $154.9 million, respectively. However, Latin America revenues decreased 3.9% to $52.2 million.
The company’s gross margin expanded 220 bps to 48.3%, courtesy of supply chain endeavors, channel mix and restructuring charges in the year-ago quarter. SG&A expenses grew 4.4% to $551 million, while as a percentage of net revenues, the same increased 190 bps to 38.5%. Net interest expense fell sharply about 38.2% to $5.7 million.
Other Financial Details
Under Armour ended the quarter with cash and cash equivalents of $416.6 million, long-term debt (net of current maturities) of $592 million and total shareholders' equity of $2,153.7 million. While cash and cash equivalents more than doubled year over year, total debt was down about 26%. Additionally, management expects to incur capital expenditures of approximately $180 million in 2019.
Guidance
Management now envisions 2019 net revenues to be up approximately 2% versus the prior projection of 3-4% increase. Under Armour cut its revenue growth forecast on account of lower than planned excess inventory to service the off-price channel; lingering traffic and conversion challenges in direct-to-consumer; and adverse currency fluctuations.
The company now expects full-year earnings to reach the high end of the previously guided range of approximately of 33-34 cents a share. The Zacks Consensus Estimate for the full year is currently pegged at 34 cents.
Under Armour now anticipates gross margin to improve 90-110 bps (versus the prior estimate of 70-90 bps) from the 2018 adjusted figure. The expansion is likely to be backed by favorable channel mix and supply-chain efforts. Operating income is now projected to reach the high end of the previously expected range of about $230-$235 million. The company estimates net interest and other expense of $30 million.
Crocs (CROX - Free Report) delivered average positive earnings surprise of 38% in the trailing four quarters. It sports a Zacks Rank #1.
Boot Barn Holdings (BOOT - Free Report) has a long-term earnings growth rate of 15% and carries a Zacks Rank #1.
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Under Armour (UAA) Stock Falls Despite Q3 Earnings Beat
Shares of Under Armour, Inc. (UAA - Free Report) are down roughly 13% during pre-market trading session, in spite of the company reporting better-than-expected third-quarter 2019 results. We note that a federal accounting probe and trimming of 2019 revenue growth forecast hurt investor sentiment.
This athletic apparel maker reported quarterly earnings of 23 cents a share that surpassed the Zacks Consensus Estimate of 18 cents but declined 8% from the year-ago figure of 25 cents. Lower revenues and higher SG&A expenses might have impacted the bottom-line performance of this Zacks Rank #3 (Hold) stock.
Nonetheless, this was the fifth straight quarter of bottom-line beat. Meanwhile, shares of this Baltimore-based company have increased 19.7% so far in the year compared with the industry’s growth of 11.4%.
Net revenues fell 0.9% (or flat on a currency neutral basis) to nearly $1,429.5 million but came ahead of the Zacks Consensus Estimate of $1,408 million, after missing the same in the preceding quarter.
Under Armour’s third-quarter results came in better than management’s expectations of 2-3% revenues decline and earnings of 17-18 cents a share.
Under Armour, Inc. Price, Consensus and EPS Surprise
Under Armour, Inc. price-consensus-eps-surprise-chart | Under Armour, Inc. Quote
We note that while direct-to-consumer revenue (represents 32% of total revenues) fell 1% to $463 million, wholesale revenue declined 2% to $892 million.
Apparel revenues inched up 0.7% year over year to $985.6 million, while Footwear revenues decreased 12% to $250.6 million. Revenues from accessories category increased 1.7% to $118.2 million. Meanwhile, Licensing revenues declined 5.6% to $29.6 million, whereas the company’s Connected Fitness segment reported an increase of 22.3% to $39.3 million.
Net revenues from North America fell 4.1% to $1,015.9 million. Remarkably, international business continued to witness decent growth, rising 4.8% (or up 8% on a currency-neutral basis). Within international business, net revenues from EMEA and Asia-Pacific regions grew 9% and 3.7% to $161 million and $154.9 million, respectively. However, Latin America revenues decreased 3.9% to $52.2 million.
The company’s gross margin expanded 220 bps to 48.3%, courtesy of supply chain endeavors, channel mix and restructuring charges in the year-ago quarter. SG&A expenses grew 4.4% to $551 million, while as a percentage of net revenues, the same increased 190 bps to 38.5%. Net interest expense fell sharply about 38.2% to $5.7 million.
Other Financial Details
Under Armour ended the quarter with cash and cash equivalents of $416.6 million, long-term debt (net of current maturities) of $592 million and total shareholders' equity of $2,153.7 million. While cash and cash equivalents more than doubled year over year, total debt was down about 26%. Additionally, management expects to incur capital expenditures of approximately $180 million in 2019.
Guidance
Management now envisions 2019 net revenues to be up approximately 2% versus the prior projection of 3-4% increase. Under Armour cut its revenue growth forecast on account of lower than planned excess inventory to service the off-price channel; lingering traffic and conversion challenges in direct-to-consumer; and adverse currency fluctuations.
The company now expects full-year earnings to reach the high end of the previously guided range of approximately of 33-34 cents a share. The Zacks Consensus Estimate for the full year is currently pegged at 34 cents.
Under Armour now anticipates gross margin to improve 90-110 bps (versus the prior estimate of 70-90 bps) from the 2018 adjusted figure. The expansion is likely to be backed by favorable channel mix and supply-chain efforts. Operating income is now projected to reach the high end of the previously expected range of about $230-$235 million. The company estimates net interest and other expense of $30 million.
3 Stocks Catching the Eyes
Zumiez (ZUMZ - Free Report) has long-term earnings per share growth rate of 12% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Crocs (CROX - Free Report) delivered average positive earnings surprise of 38% in the trailing four quarters. It sports a Zacks Rank #1.
Boot Barn Holdings (BOOT - Free Report) has a long-term earnings growth rate of 15% and carries a Zacks Rank #1.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
See 8 breakthrough stocks now>>