Under Armour (UA) Good Quarter But Too Expensive For Upgrade - Piper Jaffray

Piper Jaffray analyst, Erinn Murphy, raised her PT on Under Armour (NYSE: UA) to $43 from $35 after the company eased concerns over several issues in the short thesis:

1) highlighting that women's should achieve $1B by year end

2) inventory to improve closer to sales growth by Q2-end with flat gross margins in Q2 (vs. down 100 bps in Q1)

3) ongoing levers in pricing (footwear +HSD)

4) discussing the U.S. distribution opportunity (UA has 11,000 points of distribution domestically vs. other peers at 24,000).

During the quarter sales were fueled by slightly better-than-expected growth in footwear (+64% Y/Y vs. PJC: +60%), accessories (+26% Y/Y vs. PJC: +25%), licensing (+15% Y/Y vs. PJC: +12%) and connected fitness (+119% Y/Y vs. PJC: +60%), while apparel sales were in line with estimates (+20% Y/Y). In footwear growth was driven primarily by Stephen Curry and the expansion in the running category.

Global ASP's grew HSD during Q1, including growth in the running category. Apparel was led by the golf and training categories. Geographically, international sales were up 56% Y/Y with Q1 sales in China tripling. In women's, sales are expected to pass the $1B mark this year. Of note, women's e-commerce growth outpaced the men's category.

The analyst raised FY16 and FY17 EPS estimate to $0.66 ($0.64 prior) and $0.86 ($0.80 prior). Despite the estimate increases, due to the rich valuation, the analyst kept her Neutral rating.

For an analyst ratings summary and ratings history on Under Armour, Inc. click here. For more ratings news on Under Armour, Inc. click here.

Shares of Under Armour, Inc. closed at $43.95 yesterday.

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