FBR Capital Maintains a 'Market Perform' on Under Armour (UA); Some Concerns Emerge (Magnified by Premium Valuation), but Superior Growth Intact
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Price: $5.25 +0.19%
Rating Summary:
14 Buy, 24 Hold, 5 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
Rating Summary:
14 Buy, 24 Hold, 5 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
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FBR Capital maintains a 'Market Perform' on Under Armour, Inc. (NYSE: UA), PT lowered from $70 to $68.
FBR analyst says, "With the stock priced to perfection heading into the quarter, even with a beat and raise, concerns around gross margin pressure and inventory build are magnified. In spite of gross margin pressure on several fronts (higher input costs, lower-margin apparel mix, growth in footwear, bringing accessories in-house), the earnings trajectory remains robust as Under Armour delivers impressive top-line growth while more fully leveraging fixed costs. Broad-based sales growth accelerated in 1Q; Under Armour continues to grow core apparel (across categories) and footwear while exploiting opportunities for impressive direct-to-consumer growth (+53% in the quarter on nine new doors). The launch of Charged Cotton should be a significant new growth vehicle (we estimate a $60 million to $70 million business in FY11) that extends the brand's reach of consumers and channels of distribution. Increased exposure to cotton does heighten already elevated gross margin risk in an inflationary environment (more specific gross margin guidance of a 100-bp decline YOY was greater than our previous forecast), but we believe FY11 costs are now fully known, mitigating the risk of further downside in FY11. On a relative basis, we remain bullish on the UA fundamental story and recognize the superior growth versus peers; while yesterday's share retrenchment was enticing to get more constructive, we remain on the sidelines due to premium valuation."
"We are adjusting our FY11 EPS estimate to $1.71 (up from $1.66) on sales of $1.39 billion (+31%) and operating margin of 10.9% (+30 bps), with gross margin down 100 bps due to product cost inflation and dilution from footwear and accessories, partially offset by a higher percentage of direct-to-consumer sales. Our FY12 EPS estimate goes to $2.16. We estimate EPS of $0.09 in 2Q11."
For more ratings news on Under Armour, Inc. click here and for the rating history of Under Armour, Inc. click here.
Shares of Under Armour, Inc. closed at $69.64 yesterday.
FBR analyst says, "With the stock priced to perfection heading into the quarter, even with a beat and raise, concerns around gross margin pressure and inventory build are magnified. In spite of gross margin pressure on several fronts (higher input costs, lower-margin apparel mix, growth in footwear, bringing accessories in-house), the earnings trajectory remains robust as Under Armour delivers impressive top-line growth while more fully leveraging fixed costs. Broad-based sales growth accelerated in 1Q; Under Armour continues to grow core apparel (across categories) and footwear while exploiting opportunities for impressive direct-to-consumer growth (+53% in the quarter on nine new doors). The launch of Charged Cotton should be a significant new growth vehicle (we estimate a $60 million to $70 million business in FY11) that extends the brand's reach of consumers and channels of distribution. Increased exposure to cotton does heighten already elevated gross margin risk in an inflationary environment (more specific gross margin guidance of a 100-bp decline YOY was greater than our previous forecast), but we believe FY11 costs are now fully known, mitigating the risk of further downside in FY11. On a relative basis, we remain bullish on the UA fundamental story and recognize the superior growth versus peers; while yesterday's share retrenchment was enticing to get more constructive, we remain on the sidelines due to premium valuation."
"We are adjusting our FY11 EPS estimate to $1.71 (up from $1.66) on sales of $1.39 billion (+31%) and operating margin of 10.9% (+30 bps), with gross margin down 100 bps due to product cost inflation and dilution from footwear and accessories, partially offset by a higher percentage of direct-to-consumer sales. Our FY12 EPS estimate goes to $2.16. We estimate EPS of $0.09 in 2Q11."
For more ratings news on Under Armour, Inc. click here and for the rating history of Under Armour, Inc. click here.
Shares of Under Armour, Inc. closed at $69.64 yesterday.
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