Under Armour Has 'Solidifying Fundamentals,' Stifel Says Ahead Of Quarterly Report

Investors should continue holding a bullish stance on Under Armour Inc UAA ahead of its May 1 first-quarter earnings report, according to Stifel.

The Analyst

Stifel's Jim Duffy maintains a Buy rating on Under Armour's stock with an unchanged $18 price target.

The Thesis

Duffy is modeling the following for Under Armour's Q1: 

• EPS loss of 4 cents per share on revenue of $1.117 billion.
• Flat year-over-year revenue. 
• An international market that shows signs of ongoing momentum.
• The domestic market is "still looking for stabilization." 
• Apparel sales, more than 60 percent of the entire business, are likely to decline 2 percent year-over-year.
• Footwear should show "modest" growth of 3 percent.
• Accessories sales likely grew 4 percent and licensed sales rose 10 percent.
• Operating margin should come in at negative 1.3 percent versus positive 0.7 percent last year.
• Inventory should rise 27 percent from one year ago to $1.142 billion, or 160 days of forward inventory.

Investors are encouraged to look out for the following data points, Duffy said: 

• The scope of momentum in international markets.
• Signs of expense management.
• Signs of inventory rationalization.
• Updates to fiscal 2018 guidance.
• Commentary on specific product category performance and consumer demand trends.
• Commentary on the North American athletic market.
• Assumptions underlying any second-quarter guidance, including weather, retail traffic and promotional activity.

The case for an ongoing bullish stance on Under Armour is based on an improved margin outlook in 2019 and beyond, the analyst said.

The upcoming earnings report is unlikely to remove the "controversy" around Under Armour's multiyear outlook, but the print should result in "increased appreciation for the case of solidifying fundamentals" moving forward, Duffy said. 

Price Action

Shares of Under Armour were trading up 3.83 percent at the time of publication Tuesday. 

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