Under Armour Buy Reiterated At Canaccord Despite CFO Departure

• Under Armour Inc UA shares are up 2 percent year-to-date, despite sliding 2 percent since October 8.
• Canaccord Genuity’s Camilo Lyon maintained a Buy rating on the company, while raising the price target from $105 to $130.
• Backed by robust demand across key categories, Under Armour is expected to report solid Q3 sales growth, Lyon said, while adding that the CFO departure does not suggest any change at the company.

Under Armour is scheduled to report its Q3 results on October 22. Analyst Camilo Lyon believes that the company witnessed robust demand across key categories and regions, while also improving its sell-in execution.

Lyon raised the apparel growth estimate for the quarter from 22 percent to 25 percent. He added that apparel growth in Q3 is likely to have been drive by Armour baselayer, new product introductions in training and expanded golf and hunting lines. Moreover, about 40 percent growth in footwear is projected, driven by strong momentum in basketball and running.

The analyst projected Q3 gross margin at 49.1 percent, in-line with guidance. He added, however, that there is potential upside to the estimate in case “lower input costs (e.g. oil) begin to flow through this quarter.”

“Overall, we believe Q3 results should be a solid demonstration of the brand's accelerating momentum,” Lyon wrote. The EPS estimates for 2015 and 2016 have been raised from $1.06 to $1.09 and from $1.42 to $1.47, respectively.

Under Armour has announced the departure of its longtime CFO and COO, Brad Dickerson, effective February 2016. In the report Canaccord Genuity noted that although the news comes as a surprise, it “does not indicate a change in the company's strategy, the brand's strength, or the long-run opportunity to scale the business globally.”

The price target has been raised the valuation has rolled forward onto 2017 estimates, with no change in target multiples.