What To Expect From Under Armour’s Stock After Q3?

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Under Armour

Under Armour (NYSE: UA), a sports equipment company that manufactures footwear, sports, and casual apparel, is scheduled to report its fiscal third-quarter results on Tuesday, November 2. We expect Under Armour stock to trade higher post-fiscal Q3 2021 results with revenues and earnings likely beating consensus. After struggling through most of 2020, the company has signaled that its turnaround is in motion during the fiscal first half of 2021. The retailer is working on a multi-pronged approach that includes broadening its appeal in popular categories like running, relaunching an improved North American digital channel, implementing supply constraints to better align distribution with demand, and a restructuring program.

Our forecast indicates that Under Armour’s valuation is $23 per share, which is 22% higher than the current market price of around $19. Look at our interactive dashboard analysis on Under Armour‘s Pre-Earnings: What To Expect in Q3? for more details.

(1) Revenues expected to be in line with consensus estimates

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Trefis estimates UA’s Q3 2021 revenues to be around $1.52 Bil, 3% higher than the consensus estimate. In Q2, the company’s revenues grew a strong 91% year-over-year (y-o-y) to $1.35 billion, driven by an easy comparison to last year and a strong growth of 101% y-o-y to $905 million in North American sales. Its wholesale revenues increased 157% y-o-y to $768 million and direct-to-consumer revenue increased 52% to $561 million during the quarter. That said, the company’s Q2 2021 revenue was also 13% above pre-pandemic levels from Q2 2019. Under Armour’s management raised its revenue outlook for 2021 to a low-20s percentage y-o-y increase, replacing the previous high-teen increase guidance. We now forecast Under Armour’s Revenues to be $5.3 billion for fiscal 2021, up 23% y-o-y, compared to a prior forecast of a 13% y-o-y growth in revenues.

2) EPS likely to be higher than the consensus estimates

UA’s Q3 2021 earnings per share (EPS) is expected to reach 12 cents per Trefis analysis, 20% higher than the consensus estimate. In Q2, UA’s gross margin increased 20 bps to 49.5% of sales compared to a year ago, driven primarily by benefits from pricing and changes in foreign currency, offset by channel mix, and the sale of the MyFitnessPal platform (which carried a higher gross margin rate). This, combined with ongoing expense management, led to diluted earnings per share of 13 cents in the second quarter. As part of the company’s restructuring plan set in place last year, Under Armour has already taken a pre-tax charge of $483 million out of the projected $550 million to $600 million. It expects to recognize another $40 million to $50 million in the upcoming Q3, which will somewhat pressure the bottom line. While Under Armour still has plenty of work ahead, it’s in a better competitive place right now.

For the full year, the company raised its GAAP earnings per share forecast to range between $0.14 to $0.16, replacing the previous guidance of $0.02 to a loss of $0.04. The company also expects full-year adjusted EPS of $0.50 to $0.52 vs. the $0.28 to $0.30 prior view.

(3) Stock price estimate higher than the current market price

Going by our Under Armour’s Valuation, with a revenue per share (RPS) estimate of around $11.71 and a P/S multiple of 2x in fiscal 2021, this translates into a price of $23, which is 22% higher than the current market price of around $19.

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