Under Armour (UAA) is a Hot Investment Pick: Here's Why

Under Armour, Inc. UAA appears to be a solid bet, given its consistent efforts to remain on the growth trajectory. We expect the company to continue gaining from its focus on brand development, and the expansion of direct-to-consumer (DTC) and technology-based fitness businesses. Furthermore, apart from rolling out e-commerce platforms, Under Armour continues to look for opportunities to expand its presence worldwide.

Backed by these factors, Under Armour delivered solid fourth-quarter 2018 results, wherein both the top and bottom line grew year over year and also surpassed the Zacks Consensus Estimate. (Read: Under Armour Q4 Earnings & Sales Beat Estimates, Up Y/Y)

Moreover, a glance at the stock’s price performance shows that it has outperformed the industry in a year’s time. Shares of this Baltimore, MD-based company have gained approximately 29% compared with the industry’s 13.6% growth.

All said, let’s delve deeper into the factors that have been driving this Zacks Rank #2 (Buy) stock.

Factors Narrating Under Armour’s Growth Story

With rising wellness and health consciousness, sports apparel makers are entering into the fitness gadgets’ business and other tracking platforms to attract customers. Notably, the company’s acquisition of MapMyFitness, Endomondo and MyFitnessPal are in tune with the strategy of expanding its reach in the fitness space. Also, management is impressed with the popularity of UA HOVR. Currently, Under Armour is banking on three platforms — HOVR, Charge and Micro G — to fortify its footprint in this space.

Under Armour also continues to seek opportunities for expanding its global footprint and market share. Though the company generates a major portion of its revenues from the North America region, it intends to expand business operations to other parts of the world for offsetting the risks resulting from concentration in one geographic region.  In the process, it opened factory and brand stores in Canada and China, and provided franchise licenses in many nations.

Moreover, the company is expanding its DTC business in the U.K., Germany and the Netherlands. Further, it rolled out e-commerce platforms in countries like Mexico, Australia, New Zealand and Chile. Management expects DTC business to be up at a mid-single digit rate in 2019. Also, its international business continued to witness sturdy growth, surging 24.5% (up 28.2% on a currency neutral basis) during the fourth quarter of 2018.

These apart, Under Armour intends to consistently invest in international, women's and footwear businesses to harness benefits from growth areas. Also, management expects the digital platform to provide a boost to its performance and plans to enhance digital engagement. Based on such plans, the company expects its top line to increase in a low-double-digit rate in 2023. Furthermore, earnings per share are expected to advance 40% on a five-year compounded annual growth rate basis.

Certainly, management remains well on track with its long-term strategic plans to ensure business growth in the next five years.

Other Key Picks

G-III Apparel Group, Ltd. GIII outperformed the Zacks Consensus Estimate by a wide margin in the trailing four quarters. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ralph Lauren Corporation RL has a long-term earnings growth rate of 10.3% and a Zacks Rank #1.

Columbia Sportswear Company COLM has a long-term earnings growth rate of 10.9% and a Zacks Rank #1.

Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?

Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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