Under Armour’s earnings history
Under Armour (UA) has an enviable earnings record. It’s beaten the market consensus on quarterly earnings and sales for over five years in a row.
Consensus Wall Street analyst estimates project sales of ~$1.1 billion for Under Armour in 4Q15, almost the same as UA’s projections. This implies a growth rate of 25.8% over 4Q14. Sales for 2015 are expected to come in at $3.9 billion, slightly higher than UA’s guidance.
Under Armour’s adjusted earnings per share (or EPS) are expected to come in at ~$0.47 in 4Q15, a growth rate of 16.5% over the comparable quarter of the previous year. In 2014, UA reported EPS growth of 26.7% and sales growth of 32.2%.
The company’s 2015 EPS, estimated at $1.05, are slated to grow at 10.5% year-over-year (or YoY), significantly slower than its sales. This is partly due to the one-off costs associated with UA’s connected fitness app acquisitions.
Under Armour’s sales growth is also expected to outpace its earnings growth over the next several quarters due to higher investments on digital, infrastructure and supply chain, marketing, and global retail over the next several quarters.
However, Under Armour is targeting a gross margin of 49% by 2018. In the interim, the company is looking to maximize operating income dollars rather than to target profitability measures to make the most of its growth opportunities.[1. According to Brad Dickerson, former UA chief financial officer]
Peer group performance
The earnings performances of Under Armour’s peers were mixed in the last quarter. Peers Nike (NKE), Lululemon Athletica (LULU), and Adidas (ADDYY) came out ahead of market expectations on earnings in their last quarters. However, VF Corporation (VFC), and Skechers (SKX) missed market expectations.
Despite rising profitability in 3Q15, VFC’s results were largely impacted by the stronger US dollar, with EPS falling short of the market consensus by $0.05. Despite a record quarter, Skechers also missed consensus numbers. The company increased its top line by ~27% to $856 million in 3Q15. This revenue figure fell short of market expectations by ~$21 million.
While foreign exchange movements affected NKE’s and LULU’s results as well, their impact was more muted in the case of LULU due to limited overseas exposure. Demand for Nike’s products was able to more than offset adverse foreign exchange movements.
Under Armour, Nike, VFC, and Lululemon Athletica together constitute ~1.4% of the portfolio holdings in the Vanguard Growth ETF (VUG).
To learn more about Under Armour’s medium-term outlook, you can read Under Armour: Key Takeaways after the Latest Investor Day.
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