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Things You Must Note Before Under Armour's (UAA) Q4 Earnings

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Under Armour, Inc. UAA is scheduled to report fourth-quarter 2019 results on Feb 11, before the opening bell. This Baltimore, MD-based company reported a positive earnings surprise of 27.8% in the preceding quarter. Investors are counting on another beat by this athletic apparel maker in the to-be-reported quarter. If all goes well, this will mark the company’s third straight quarter of an earnings beat.

The Zacks Consensus Estimate for fourth-quarter earnings is pegged at 10 cents, suggesting growth of about 11% from 9 cents earned in the year-ago quarter. We note that the Zacks Consensus Estimate has been stable over the past 30 days. The consensus estimate for quarterly revenues stands at $1,465 million, which indicates an increase of more than 5% from the year-ago quarter.

Under Armour, Inc. Price and EPS Surprise


Under Armour, Inc. Price and EPS Surprise

Under Armour, Inc. price-eps-surprise | Under Armour, Inc. Quote

Key Things to Note

In the last earnings call, Under Armour guided an improvement in direct-to-consumer business for the fourth quarter, thanks to traffic growth, conversion and new door openings. Management also projected an improvement in licensing business on account of contractual royalty minimums and settlement with one of its North American partners. These factors are expected to show on the company’s fourth-quarter top line.

Notably, Under Armour has been progressing well with its multi-year transformation plan and is focused on strengthening brand through enhanced customer connections, effective innovation and strict go-to-market process. Additionally, the company’s digital and marketing capabilities coupled with footwear and connected fitness businesses are key strengths. The company’s international business is another growth driver.

Furthermore, a positive channel mix from lower off-price sales and supply-chain endeavors, comprising more favorable product cost and lower airfreight are likely to have contributed to gross margin expansion.

However, headwinds related to persistent traffic and conversion challenges, mainly in the company’s North American outlets, coupled with lower-than-planned excess inventory to service the off-price channel remain. Again, adverse impact of foreign currency translation cannot be ignored along with stiff competition from prominent retailers.

What the Zacks Model Unveils

Our proven model does not predict an earnings beat for Under Armour this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Although Under Armour carries a Zacks Rank #3, it has an Earnings ESP of -1.96%.

Stocks With a Favorable Combination

Here are three companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Zumiez ZUMZ has an Earnings ESP of +0.24% and a Zacks Rank #1.  You can see the complete list of today’s Zacks #1 Rank stocks here.

Crocs CROX has an Earnings ESP of +30.00% and a Zacks Rank #3.

G-III Apparel Group (GIII - Free Report) has an Earnings ESP of +5.62% and a Zacks Rank #3.

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