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Under Armour Stock Surges after Beating 1Q17 Estimates

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Part 4
Under Armour Stock Surges after Beating 1Q17 Estimates PART 4 OF 5

Under Armour Reports First-Time Loss in Q1 but Beats Expectations

A look at Under Armour’s 1Q17 bottom line

Under Armour (UAA), which released its 1Q17 results on April 27, reported a net loss of $2 million—its first-ever loss after going public in 2005. Its loss per share stood at 1 cent, compared to consensus expectations of a 4 cent loss.

Its larger rival Nike (NKE) reported a ~24% YoY jump in quarterly earnings to 68 cents per share, outperforming Wall Street expectations. The earnings beat was, however, driven by a lower tax rate, a decline in average share count, and lower demand creation expenses.

Lululemon Athletica (LULU), on the other hand, missed consensus earnings estimates. Yet the company’s earnings improved 17.6% YoY (year-over-year) to $1.00 per share.

Under Armour Reports First-Time Loss in Q1 but Beats Expectations

A look at 1Q17 margins

Gross margin declined 70 basis points to 45.2% of sales as gains from channel and product mix were offset by the company’s inventory management efforts. Management had forecasted a 100 basis point decline in the 1Q17 gross margin.

The company’s operating margin was down 260 basis points to just 0.7% of sales as SG&A (selling, general, and administrative) expenses jumped 210 basis points to 44.6% of sales. Higher SG&A expenses resulted from the company’s continued investments in the footwear, direct-to-consumer, and international businesses.

ETF investors seeking to add exposure to UA can consider the iShares Russell Mid-Cap Growth ETF (IWP), which invests 0.2% of its portfolio in the company.

2017 guidance

Under Amour’s Management maintained its fiscal 2017 guidance of $320 million in operating profit and a marginal year-over-year decline in gross margin compared to the 46.4% it achieved in 2016.

Read about the company’s stock market performance and Wall Street expectations in the next part of this series.

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