FBR’s Insights: Walt Disney Co (DIS) and Under Armour Inc (UA)

FBR analysts are Bullish on entertainment giant Walt Disney Co (NYSE:DIS) and athletic apparel maker Under Armour Inc (NYSE:UA), as Disney searches for a successor CEO and Under Armour shows signs of strong market penetration and footwear growth.

Walt Disney Co

Analysts at FBR & Co were surprised to learn that Thomas O. Staggs was set to depart Disney on May 6. Staggs was thought to be the apparent heir to the CEO position at Disney. Following the news, FBR analyst Barton Crockett reiterated an Outperform rating without providing a target price.

Crockett explains how the CEO succession process at Disney is “highly competitive.” Former CFO Jay Rasulo left the company after appearing to lose the battle for lead inside candidate to Staggs, who was promoted to COO and a qualified track record to succeed Iger. According to Crockett, Staggs has experience as he has successfully run parks & resorts since 2012 and before was the CFO for Disney for 12 years.

According to Crockett, outsiders seem to be the alternative to an insider for CEO position in May as Staggs, the leading insider candidate, and Rasulo are now gone. He questions the idea of an outsider candidate because Disney is large and has a strong culture and history of financial duplicate coupled with its unique positioning in movie, theme park, licensing, and sports network industries. Despite the questions surrounding an outsider, Crockett believes an outsider could offer a positive perspective in light of the massive change happening in the TV and entertainment industry.

According to TipRanks which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Barton Crockett has a yearly average return of 4.8% and a 54% success rate. Crockett is ranked #606 out of 3842 analysts.

Under Armour Inc

Due to strong domestic footwear growth and international expansion, analysts at FBR & Co. are bullish on the future of Under Armour’s (UA) stock performance. Analyst Susan Anderson reiterated an Outperform rating and raised the target price from $115 to $118.

After analyzing the market for athletic apparel in Europe, Asian-Pacific, and Latin America Anderson estimates that UA could reach 22% international penetration by 2018, adding ~1.9 billion in international revenue. Additionally, Anderson believes UA could reach 18% North American footwear penetration, which represents approximately 20% of total footwear penetration by 2018. Following the analysis Anderson ahs raised her Revenue growth estimates to +32.4%/+29.2%/+27.4% in 2016/2017/2018, versus +29.0%/+28.3%/+26.7% previously.

Anderson compares UA’s trajectory similar to that of NIKE. NIKE, according to Anderson, reached 10% international penetration 19 years after it was founded, while UA similarly breached 10% international penetration 19 years after its founding. Further, NIKE reached 20% international penetration 21 years after it was founded similar to UA which is projected to achieve 20% international penetration 22 years after its founding. Anderson believes in all that UA’s international growth could contribute 10% to total revenue growth by 2018. Anderson notes that UA has tracked slightly higher than NIKE from 2013-2015, and her estimates have UA tracking lower than NIKE from 2016-2018.This gives her “confidence that [the] estimates are conservative” and there could be a larger upside to the consensus numbers.

According to TipRanks which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Susan Anderson has a yearly average return of 5% and a 61% success rate. Anderson is ranked #675 out of 3842 analysts.

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