CLSA Rated Under Armour as ‘Buy’

Price movement

Under Armour (UAA) has a market cap of $12.2 billion. It fell 0.51% to close at $29.20 per share on January 19, 2017. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -4.4%, -3.9%, and 0.52%, respectively, on the same day.

UAA is trading 2.5% below its 20-day moving average, 5.1% below its 50-day moving average, and 21.7% below its 200-day moving average.

CLSA Rated Under Armour as ‘Buy’

Related ETF and peers

The Schwab US Broad Market ETF (SCHB) invests 0.05% of its holdings in Under Armour. The YTD price movement of SCHB was 1.1% on January 19.

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

  • Nike (NKE) — $86.7 billion
  • Skechers USA (SKX) — $3.9 billion
  • Columbia Sportswear (COLM) — $3.8 billion

UAA’s rating

On January 19, 2017, CLSA has initiated the coverage of Under Armour with “buy” rating.

Performance of Under Armour in 3Q16

Under Armour (UAA) reported 3Q16 net revenues of $1.5 billion, a YoY (year-over-year) rise of 22.2%, compared to $1.2 billion in 3Q15. The company’s gross profit margin and operating margin fell 130 basis points and 70 basis points, respectively, in 3Q16 YoY.

UAA’s gross profit margin fell due to the impact of an unfavorable foreign exchange, an increase in promotions, and the timing of liquidation, partially offset by the margin improvement in product costs.

Its net income, EPS (earnings per share) of Class A and Class B, and EPS of Class C common stock rose to $128.2 million, $0.29, and $0.29, respectively, in 3Q16. Those figures compare to $100.5 million, $0.23, and $0.23, respectively, in 3Q15.

Under Armour’s cash and cash equivalents and inventories rose 12.9% and 11.9%, respectively, in 3Q16 YoY.

Projections

Under Armour (UAA) made the following projections for fiscal 2016:

  • net revenues: ~$4.9 billion
  • operating income: $440 million–$445 million
  • interest expense: ~$30 million

In the next part of this series, we’ll discuss Nike (NKE).