Under Armour Stock Soars—Will Its 2Q15 Earnings Justify the Rise?



Under Armour’s (UA) 2Q15 earnings report preview

Fast-growing sportswear company Under Armour (UA) will declare 2Q15[1. Quarter ending June 30, 2015] earnings on July 23. The company has an enviable growth record by most standards. The first quarter of 2015 was the 20th straight quarter of 20% or higher revenue growth rates for the company.

Consensus Wall Street analyst estimates project a turnover of ~$761 million in 2Q15, an increase of nearly 25% year-over-year. The number two sportswear company in the US has beaten estimates in its last 25 quarters.

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Company performance

Going by historical trends, company performance has been strong. Under Armour clocked revenue growth of 25% in 1Q15, with sales coming in at $805 million.

For the full year, the company’s expecting revenue of $3.78 billion, up 23% over 2014’s revenue. According to guidance provided by Under Armour CFO Brad Dickerson, the higher US dollar is expected to reduce sales by 2% to 3%.

Although international sales grew by 108% in 2014 to $288 million, these remain a relatively small portion of the overall pie. The company derived 90.7% of its sales from the US and Canada in 2014, or ~$2.8 billion.

In comparison, Nike (NKE) derived ~45% of its fiscal 2015 sales from the US and Canada. US sales made up almost 87% of UA’s total sales. Lululemon Athletica (LULU) and VF Corporation (VFC) derived ~30% and 38.3% of their respective sales from outside the US in their most recent fiscal years.

Stock performance

Under Armour stock and that of some of its peers hit several record highs in 2015. The last one for Under Armour was on July 13, when Jordan Spieth won the John Deere Classic, his fourth title of the year. Under Armour stock rose by 3.5% to close at $89.35 on July 13. Nike also hit another record high, rising by 1.7% to $112.41.

Under Armour has made some significant announcements, including one related to a new class of stock that will be floated on the New York Stock Exchange. We’ll touch upon these announcements and their implications over the course of this series.

Nike, VFC, and Under Armour together constitute 4.6% of the portfolio holdings of the Consumer Discretionary Select Sector SPDR Fund (XLY). As S&P 500 Index components, they’re also included in the holdings of the SPDR S&P 500 ETF Trust (SPY). SPY has 12.7% of its holdings invested in consumer discretionary firms.


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