Athletic apparel maker Under Armor ( UAA ) will report fourth-quarter earnings on January 31. The company will post its quarterly results before the market open, with the consensus calling for earnings of $0.25 per share. During the same period last year the company had earnings of $0.48. The stock has lost 57.8% of its value over the last twelve months.
UAA was recently trading at $28.95, down $18.99 from its 12-month high and just $0.66 above its 12-month low. Technical indicators for UAA are bearish and the stock is in a strong downward trend. The stock has fallen below recent support and has resistance below $31.00. Of the 30 analysts who cover the stock, 12 rate it a "strong buy", 17 rate it a "hold", and one rates it a "strong sell". The stock receives S&P Capital IQ's 3 STARS "Hold" ranking.
The last year has been tough on Under Armor, with the stock losing almost 58% over the course of the last twelve months. The company's margins have been falling, and shares were punished in sympathy to weakness from industry heavyweight Nike ( NKE ). Last quarter was disastrous for the company. The stock sold off sharply on the quarterly report, despite stronger than expected profit and revenue. The reason for the sell off following the quarterly report was the company's warning that future reports would be well below analyst estimates. Competition is definitely having a material impact on the company, and as such I would not suggest establishing any new bullish positions on the stock that were not adequately hedged until the company is able to show improvements. The good news for investors is that so much pessimism has been priced into the stock, that shares could really bounce if the company shows signs of improvement. The consensus calls for earnings of $0.25, but the street has a whisper number of $0.26, and if the company is able to report earnings in-line or better than the whisper number, the stock should erase some of its recent losses.
Stock Only Trade
If you want a bullish hedged trade on the stock, consider an April 20/25 bull-put credit spread for a 40-cent credit. That's a potential 8.7% return (37.8% annualized*) and the stock would have to fall 12.3% to cause a problem.
If you want to take a bearish stance on the stock at this time, consider an April 32.50/37.50 bear-call credit spread for a $0.45 credit. That's a potential 9.9% return (43.0% annualized*) and the stock would have to rise 13.8% to cause a problem.
Covered Call Trade
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Originally published on InvestorsObserver.com