Stock Update (NYSE:UA): Under Armour Inc Announces 3Q:16 Results

UAUnder Armour Inc (NYSE:UA) announced financial results for the third quarter ended September 30, 2016. Net revenues increased 22% in the third quarter of 2016 to $1.47 billion compared with net revenues of $1.20 billion in the prior year’s period. On a currency neutral basis, net revenues increased 23% compared with the prior year’s period. Operating income increased 16% in the third quarter of 2016 to $199 million compared with $171 million in the prior year’s period. Net income increased 28% in the third quarter of 2016 to $128 million compared with $100 million in the prior year’s period and diluted earnings per share for the third quarter of 2016 were $0.29 compared with $0.23 in the prior year’s period.

During the third quarter, wholesale net revenues grew 19% year-over-year to $1.01 billion compared to $850 millionin the prior year’s period, while Direct-to-Consumer net revenues grew 29% year-over-year to $408 millioncompared to $316 million in the prior year’s period. North America net revenues for the third quarter grew 16% year-over-year.  International net revenues, which represented 15% of total net revenues for the third quarter, grew 74% year-over-year, or 80% on a currency neutral basis.

Within product categories, apparel net revenues increased 18% to $1.02 billion compared with $866 million in the same period of the prior year, led by growth in men’s training, women’s training, golf and team sports.  Footwear net revenues increased 42% to $279 million from $196 million in the prior year’s period, driven by strong growth in running and basketball.  Accessories net revenues increased 18% to $122 million from $104 million in the prior year’s period, driven primarily by growth in bags and headwear.

Kevin Plank, Chairman and CEO of Under Armour, Inc., stated, “Under Armour is a growth company and our ambitions for the Brand have never been higher. This marks our 26th consecutive quarter of 20+% revenue growth demonstrating the strength of the Under Armour Brand. From the Olympic Games in Rio to the launch of Under Armour Sportswear at New York Fashion Week, the Under Armour Brand continues to extend its reach to new consumers while remaining authentic and rooted in sport.  In the third quarter, our key strategies and investments to diversify our portfolio on a global scale were evident across categories, channels, and geographies. In running, we experienced strong global demand for our Slingride and Bandit 2 footwear styles, showcasing the continued expansion of our premium $100+ footwear offerings.  Within direct-to-consumer we launched three new e-commerce sites, bringing our total to 30 global sites, as we focus on expanding brand experience and premium offerings for consumers wherever they shop. And finally, we hosted our second tour through Asia with Stephen Curry, where the Brand continues to resonate and drive incredible momentum in new markets.”

Gross margin for the third quarter of 2016 was 47.5% compared with 48.8% in the prior year’s period, primarily reflecting negative impacts from the timing of liquidation, increased promotions, and foreign exchange rates, partially offset by continued product cost margin improvements. Selling, general and administrative expenses grew 20% to $499 million compared with $416 million in the prior year’s period primarily driven by investments in Direct-to-Consumer and overall headcount to support the Company’s strategic initiatives.

Balance Sheet Highlights

Cash and cash equivalents was $180 million at September 30, 2016 compared with $159 million at September 30, 2015. Inventory at September 30, 2016 increased 12% to $971 million compared with $867 million atSeptember 30, 2015. Total debt increased 19% to $1.07 billion at September 30, 2016 compared with $902 millionat September 30, 2015.

Updated Outlook

Based on current visibility, the Company continues to expect 2016 net revenues of approximately $4.925 billion, representing growth of 24% over 2015, and 2016 operating income of $440 million to $445 million, representing growth of 8% to 9% over 2015.  Below the operating line, the Company expects interest expense of approximately$30 million, an effective full year tax rate of approximately 35.5%, and fully diluted weighted average shares outstanding of approximately 446 million.

The Company will provide an update on its longer-term guidance on the third quarter earnings conference call.

Mr. Plank concluded, “Over the past twenty years we have established ourselves as a premium global brand with a track record of strong financial results. Looking back over the past nine months, it has never been more evident that we are at a pivotal moment in time, where the investments we are making today will fuel our growth and drive our industry leadership position for years to come. As a growth company with an expanding global footprint and businesses like footwear and women’s each approaching a billion dollars this year, we have never been more focused on the long-term success of our Brand.” (Original Source)

Shares of Under Armour are up nearly 2% to $38.70 in pre-market trading Tuesday. UA has a 1-year high of $49.89 and a 1-year low of $32.34. The stock’s 50-day moving average is $38.69 and its 200-day moving average is $39.91.

On the ratings front, Under Armour has been the subject of a number of recent research reports. In a report issued on October 21, Mizuho analyst Betty Chen reiterated a Buy rating on UA, with a price target of $52, which implies an upside of 37% from current levels. Separately, on the same day, Canaccord’s Camilo Lyon reiterated a Buy rating on the stock and has a price target of $65.

According to, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Betty Chen and Camilo Lyon have a total average return of -3.9% and -0.5% respectively. Chen has a success rate of 43% and is ranked #3642 out of 4190 analysts, while Lyon has a success rate of 44% and is ranked #2951.

Overall, one research analyst has rated the stock with a Sell rating, 7 research analysts have assigned a Hold rating and 13 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $46.43 which is 22.5% above where the stock closed yesterday.

Under Armour, Inc. engages in the developing, marketing and distributing of branded performance apparel, footwear and accessories for men, women and youth. It operates through the following geographical segments: North America, Latin America, Europe, the Middle East, and Africa. 


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