Under Armour Sees Weak Sales but Beats Estimates

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Part 6
Under Armour Sees Weak Sales but Beats Estimates PART 6 OF 7

Under Armour’s Stock Touches 4-Year Low after 2Q17 Results

Market reaction to Under Armour’s 2Q17 results

Under Armour’s (UAA) stock plunged 8.6% on August 1, after the company lowered its top-line and margin guidance and announced its new restructuring plan. Investors seemed unimpressed with Under Armour’s 2Q17 top- and bottom-line beats. The stock touched its lowest price since August 2013.

Under Armour is currently trading at $18.30, sitting at a YTD (year-to-date) loss of 37%. It is trading 140% below its 52-week high.

Under Armour&#8217;s Stock Touches 4-Year Low after 2Q17 Results

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In comparison, competitors Nike (NKE) and Lululemon Athletica (LULU) have gained 18% and 3%, respectively, this year. Specialty athletic retailers Foot Locker (FL) and Dick’s Sporting Goods (DKS) have fallen, losing 34% and 31% YTD. However, as shown in the graph above, Under Armour is clearly the worst performing stock in the apparel and accessory space so far this year. It has also underperformed the S&P 500 Apparel and Accessories Index and the S&P 500 (SPX), which have risen 6.2% and 10.6%, respectively.

Discussing valuation

As discussed, Under Armour’s top line rose 8.7% in 2Q17, outperforming peers Nike, Lululemon, and Columbia Sportswear (COLM), which saw rises of 5.3%, 5%, and 2.6%, respectively. However, investors expect much more from a company that trades at a huge premium. Under Armour’s one-year forward earnings multiple is 43x. In comparison, Nike, Lululemon, and Columbia are trading at 25x, 26x, and 21x, respectively.

Based on near-term earnings potential, Under Armour is the weakest in its peer group. Its EPS (earnings per share) are expected to fall 12.8% over the next 12 months. Whereas Nike’s EPS are expected to fall 3.4%, Lululemon’s and Columbia’s EPS are expected to rise 9% and 4.2%, respectively, according to Wall Street analysts. ETF investors seeking exposure to Under Armour could consider the iShares US Consumer Goods ETF (IYK), which invests 0.15% of its portfolio in the company.


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