Under Armour (UAA) Shares Gain Despite Lowering Profit Outlook

August 3, 2022 3:58 PM EDT
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Price: $6.50 --0%

Rating Summary:
    14 Buy, 23 Hold, 5 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 8 | Down: 4 | New: 29
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Under Armour Inc (NYSE: UAA) (NYSE: UA) shares rose over 2% Wednesday after the company reported earnings, despite profit being in-line and revenue missing expectations.

The sports equipment company reported EPS of $0.03, in-line with the analyst estimate of $0.03, with revenue for the quarter coming in at $1.3 billion versus the consensus estimate of $1.34 billion.

The company's revenue miss was down to direct-to-consumer revenue falling 7% to $521 million, driven by an 8% decline in owned and operated store revenue, with e-commerce revenue also falling, this time 6%. E-commerce revenue represented 39% of the company's total direct-to-consumer business during the quarter. Wholesale revenue increased 3% to $792 million.

Looking ahead, the company also cut its profit outlook for the full year due to higher promotional activities. As a result, they now expect earnings per share for the full year to be between $0.61 and $0.67, down from previous guidance of between $0.79 and $0.84.

Following the report, Stifel analyst Jim Duffy maintained a Hold rating and a $10 per share price target on Under Armour.

He told investors the "key elements of UAA's FY1Q report include 1) changes in fundamental trajectory during FY1Q including inflection to DTC declines, 2) a 2H weighted revised outlook (implies acceleration from ~flat FY1H to +LDD in FY2H), and 3) comments on a pivot to a more growth-oriented mindset including pursuit of sportswear opportunities."

"Given negative inflection in DTC during FY1Q and risk associated with the assumed acceleration in FY2H against a slowing economic backdrop and the unproven market reception to expansion into sportswear, at the current valuation, we see it appropriate to take a wait and see approach."

By Sam Boughedda

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