Under Armour: Piper Jaffray Analysts Not Getting Into Stock Before Earnings

On April 3, Under Armour Inc UA management reiterated its FY16 guidance, reflecting 25 percent sales growth and 23 percent earnings growth. Piper Jaffray’s Erinn E. Murphy has a Neutral rating for the company, with a price target of $35. The analyst said that the company’s Q1 sales may beat expectations on the back of an outperformance by footwear.

While keeping the sales estimate for 1Q unchanged at $1,036 million, analyst Erinn Murphy said that there was opportunity for slight sales outperformance. He added that the y/y sales growth estimate for apparel appeared fair at 20 percent, while the footwear category may outperform the 60 percent estimate. “We believe a 70–80 percent growth rate is in the realm of possibility,” the analyst wrote.

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Although sales may outperform in 1Q, this is “the most insignificant quarter” for Under Armour, as it contributes only a small fraction of the company’s total earnings for the year, Murphy pointed out, while adding that 92 percent of Under Armour’s earnings are generated in the second half.

1Q Earnings Call

The 1Q earnings call is scheduled for April 21, and would mark the first one at which CFO Chip Molloy will participate fully in the discussion. “We will be looking for any changes in the company's inventory levels (which tracked 15 points above sales last quarter at +46 percent Y/Y) in addition to the company's accounts receivable which held a 24 percent spread vs. sales in Q4,” Murphy commented.