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Nomura Securities Has Rated Under Armour as ‘Neutral’

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UA’s price movements

Under Armour (UA) has a market cap of $16.2 billion. It fell 2.4% to close at $38.33 per share on September 13, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -1.5%, -6.7%, and -4.9%, respectively, on the same day.

UA is trading 6.8% below its 20-day moving average, 6.1% below its 50-day moving average, and 4.8% below its 200-day moving average.

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Related ETF and peers

The Schwab US Broad Market ETF (SCHB) invests 0.05% of its holdings in Under Armour. The ETF tracks a cap-weighted index that measures the largest 2,500 stocks in the United States. The YTD price movement of SCHB was 5.3% on September 13, 2016.

The market caps of Under Armour’s competitors are as follows:

  • Nike (NKE): $94.3 billion
  • Skechers USA (SKX): $3.7 billion
  • Columbia Sportswear (COLM): $3.9 billion

Under Armour’s rating

Nomura Securities has initiated coverage of Under Armour with a “neutral” rating and has set the stock’s price target at $38 per share.

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Performance of Under Armour in 2Q16

Under Armour reported 2Q16 net revenue of $1.0 billion, a rise of 27.7% over $783.6 million in 2Q15. Revenue from its apparel, footwear, accessories, licensing, and connected fitness products rose 18.9%, 58.0%, 21.3%, 16.0%, and 73.3%, respectively, between 2Q15 and 2Q16. The company’s gross profit margin and income from operations fell 1.4% and 39.3%, respectively.

UA’s net income and EPS (earnings per share) of Class A and Class B common stock fell to $6.3 million and -$0.12, respectively, in 2Q16 compared to $14.8 million and $0.03, respectively, in 2Q15. It reported EPS of Class C common stock of $0.15 in 2Q16 compared to $0.03 in 2Q15.

Under Armour’s cash and cash equivalents fell 6.7%, and its inventories rose 38.8% between 4Q15 and 2Q16. Its current ratio fell to 2.6x, and its debt-to-equity ratio rose to 0.93x in 2Q16 compared to 3.1x and 0.72x, respectively, in 4Q15.

Projections

Under Armour (UA) has made the following projections for 2016:

  • net revenue of ~$4.9 billion
  • operating income of $440 million–$445 million
  • interest expense of ~$32 million
  • effective tax rate of ~36.5%
  • ~448 million fully diluted weighted average shares outstanding

In the next part of this series, we’ll look at Kate Spade (KATE).

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