What To Watch For In Under Armour’s Stock Post Q1?

UA: Under Armour logo
Under Armour

[Note: UA recently changed its fiscal year-end to March 31 from December 31]

Under Armour (NYSE: UA), a sports equipment company that manufactures footwear, sports, and casual apparel, is scheduled to report its fiscal first-quarter results on Wednesday, August 3. We expect Under Armour stock to trade higher post-fiscal Q1 2023 results with revenues and earnings likely beating consensus. Under Armour virtually skipped FY’22 with its March-end transition quarter in a separate period and went straight into fiscal 2023 while realigning its fiscal year to start in April instead of January. The company expects revenue to grow between 5% and 7% in fiscal 2023, gross margins to be compressed by inflation and foreign exchange headwinds, and adjusted EPS to rise between flat and 7%.

Our forecast indicates that Under Armour’s valuation is $11 per share, which is 33% higher than the current market price. Look at our interactive dashboard analysis on Under Armour‘s Earnings Preview: What To Expect in Q1? for more details.

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(1) Revenues & Earnings Expected to be Well  Ahead of Consensus Estimates

Trefis estimates UA’s Q1 2023 revenues to be around $1.46 Bil and EPS to be around 5 cents, both well ahead of the consensus estimate. In the transition quarter ended March, UA’s revenues grew 3% year-over-year (y-o-y) to $1.3 billion, but its gross margin declined by 3.5 percentage points to 46.5%, and selling, general, and administrative expenses rose by 16% y-o-y. All told, the retailer generated a net loss of $60 million, and after adjusting for restructuring charges and other items – the company posted a loss per share of $0.01. This compared to market estimates of $0.06 adjusted earnings per share.

The company’s stock is down 54% YTD as the company’s growth slowed down –  due to supply chain challenges, rising costs, and Covid-19 disruptions in China. Under Armour was unable to obtain the inventory needed to satisfy consumer demand in the March-ending quarter, due to supply chain disruptions. The company’s profitability was further impacted by higher shipping costs, and it reported an unexpected loss in the quarter. However, we expect the company to see improved results in the upcoming quarter compared to its transition quarter, driven by strength in its direct-to-consumer business (which makes up almost 40% of its top line).

We now forecast Under Armour’s Revenues to be $6.1 billion for fiscal 2023, up 6% y-o-y.

(2) Stock Price Estimate Higher than the Current Market Price

Going by our Under Armour’s Valuation, with a earnings per share (EPS) estimate of around 65 cents and a P/E multiple of 16.8x in fiscal 2023, this translates into a price of $11, which is almost 33% higher than the current market price.

It is helpful to see how its peers stack up. Under Armour Peers shows how UA’s stock compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns Aug 2022
MTD [1]
YTD [1]
Total [2]
 UA Return 0% -54% -67%
 S&P 500 Return 0% -13% 84%
 Trefis Multi-Strategy Portfolio 0% -13% 241%

[1] Month-to-date and year-to-date as of 8/1/2022
[2] Cumulative total returns since the end of 2016

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