It has been about a month since the last earnings report for Under Armour, Inc.UAA . Shares have added about 14.6% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is UAA due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Under Armour (UAA) Beats on Q1 Earnings, Reiterates '18 View
Under Armour reported break-even earnings per share in the first quarter of 2018, which compared favorably with the Zacks Consensus Estimate of a loss of 5 cents and the year-ago loss of a cent.
Following robust demand in Europe, the Middle East and Africa (EMEA), Asia-Pacific and Latin America, the company's top line increased 5.9% to $1,185.4 million, beating the consensus estimate of $1,122 million.
Apparel sales rose 7.1% to $766.3 million, while Footwear net revenues inched up 0.8% to $271.8 million in the quarter under review. Net revenues in the Accessories category were up 3.4% to $92.2 million, while Licensing revenues rose 8.8% year over year to $26.3 million. Moreover, the company's Connected Fitness segment reported a year-over-year increase of 34.4% to $28.8 million.
North America net revenues dropped 0.4% to $867.5 million, while the same from EMEA, Asia-pacific and Latin America jumped 23.4%, 34.6% and 21% to $126.9 million, $115.6 million and $46.5 million, respectively.
Also, gross margin contracted 120 basis points (bps) to 44.2% due to aggressive inventory management that offset favorable foreign exchange fluctuation. Adjusted gross margin shrunk 60 bps to 44.8%.
Other Financial Details
Under Armour ended the quarter with cash and cash equivalents of $283.6 million, up 64.8% from the prior-year quarter. Long-term debt was $758.7 million compared with $784.1 million a year ago. Shareholders' equity at the end of the quarter was $2,017.7 million.
Management reaffirmed the full-year 2018 outlook. The company expects 2018 revenues to increase by low single-digit percentage rate. While revenues from North America are likely to decline by mid-single-digit, international revenues are likely to increase more than 25%. The Zacks Consensus Estimate for revenues is pegged at $5.11 billion.
This company continues to anticipate adjusted gross margin growth of nearly 50 basis points to 45.5%. This improvement can be attributed to lower promotional activity, product costs, channel mix as well as variation in foreign currency.
Adjusted operating income is expected around $130-$160 million. The company projects interest expenses of about $45 million. Capital expenditures are anticipated to be nearly $225 million, compared with $275 million in 2017.
Management expects adjusted earnings per share in the range of 14-19 cents per share. The Zacks Consensus Estimate is pegged at 17 cents per share, which is well within the company's guided range.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There have been ten revisions lower for the current quarter. Last month, the consensus estimate has shifted downward by 48.7% due to these changes.
Under Armour, Inc. Price and Consensus
Currently, UAA has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is suitable for growth and momentum investors.
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Interestingly, UAA has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.