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Category: Stock Market and Under Armour
Date: 5 November 2019 Stock Price: $17.14 We take a look at the 3rd quarter earnings report of their 2019 fiscal year of Under Armour a leading manufacturer of performance athletics apparel. The group is currently being investigated for suspected accounting malpractices.
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About Under Armour
Under Armour, Inc., headquartered in Baltimore, Maryland, is a leading inventor, marketer and distributor of branded athletic performance apparel, footwear and accessories. Powered by one of the world’s largest digitally connected fitness and wellness communities, Under Armour’s innovative products and experiences are designed to help advance human performance, making all athletes better
Financial overview of Under Armour's 3rd quarter 2019 earnings results
The data below refers to the latest quarter's data (unless specified otherwise)
- Net revenues: $1.429 billion (down from $1.442 billion for the same quarter of the previous year)
- Net revenues decreased by -0.9% over the last 12 months
- Cost of goods sold: $733.448 million (down from $777.769 million for the same quarter of the previous year)
- Cost of goods sold decreased by -5.7% over the last 12 months
- Net income: $102.315 million (up from $75.226million for the same quarter of the previous year)
- Diluted earnings per share: $0.23 (up from $0.17 for the same quarter of the previous year)
- PE ratio of Under Armour: 18.6
- Number of shares in issue: 545.695 million (down from 454.031 million for the same quarter of the previous year)
- Cash and cash equivalents: $416.603 million
- Cash and cash equivalents per share: $0.76
- Cash and cash equivalents makes up 4.45% of Under Armour's market capital
- Cash and cash equivalents makes up 8.99% of Under Armour's total assets
- Accounts receivable: $843.495 million
- Accounts receivable makes up 18.2% of Under Armour's total assets
- Accounts receivable makes up 18.2% of Under Armour's total assets
- Inventories: $906.544 million
- Inventories makes up 19.56% of Under Armour's total assets
- Goodwill in Under Armour: $541.798 million
- Goodwill per share: $0.99
- Goodwill makes up 11.69% of Under Armour's total assets
- Goodwill per share: $0.99
- Stockholders equity in Under Armour: $2.153 billion
- Stockholders equity per share: $3.94
- Stockholders equity per share: $3.94
Under Armour (NYSE: UAA) management commentary on 3rd quarter 2019 earnings
Under Armour, Inc. (NYSE: UA, UAA) today announced financial results for the third quarter ended September 30, 2019.
“Building our long-term brand strength remains at the center of everything we do,” said Under Armour Chairman and CEO Kevin Plank. “Our ongoing transformation across the business continues to make us smarter, faster and more operationally excellent. As we make the turn into 2020, we are confident in our ability to deliver our fourth quarter targets while proactively supporting higher levels of strategic marketing investments that will further fuel the Under Armour brand.”
“Building our long-term brand strength remains at the center of everything we do,” said Under Armour Chairman and CEO Kevin Plank. “Our ongoing transformation across the business continues to make us smarter, faster and more operationally excellent. As we make the turn into 2020, we are confident in our ability to deliver our fourth quarter targets while proactively supporting higher levels of strategic marketing investments that will further fuel the Under Armour brand.”
- Revenue was down 1 percent to $1.4 billion (flat on a currency neutral basis).
- Wholesale revenue decreased 2 percent to $892 million and direct-to-consumer revenue decreased 1 percent to $463 million, representing 32 percent of total revenue.
- North America revenue decreased 4 percent to $1.0 billion and the international business increased 5 percent to $368 million (up 8 percent currency neutral), representing 26 percent of total revenue. Within the international business, revenue was up 9 percent in EMEA (up 13 percent currency neutral), up 4 percent in Asia-Pacific (up 6 percent currency neutral) and down 4 percent in Latin America (down 1 percent currency neutral).
- Apparel revenue increased 1 percent to $986 million; footwear revenue decreased 12 percent to $251 million; and accessories revenue increased 2 percent to $118 million in the third quarter. On a year-to-date basis, apparel and footwear revenue are relatively flat and accessories is down approximately 3 percent compared to 2018.
- Gross margin increased 220 basis points to 48.3 percent compared to the prior year driven by channel mix, supply chain initiatives and restructuring charges in the prior period.
- Selling, general & administrative expenses increased 4 percent to $551 million, or 38.5 percent of revenue.
- Operating income was $139 million.
- Net income was $102 million or $0.23 diluted earnings per share.
- Cash and cash equivalents increased 147 percent to $417 million.
- Inventory decreased 23 percent to $907 million.
- Total debt was down 26 percent to $592 million.
Updated Fiscal 2019 Outlook
- Revenue is now expected to be up about 2 percent versus the previously expected range of 3 to 4 percent, due to:
- Lower than planned excess inventory to service the off-price channel;
- Ongoing traffic and conversion challenges in direct-to-consumer; and,
- Negative impacts from changes in foreign currency.
- Gross margin is now expected to increase approximately 130 to 150 basis points versus the previously expected range of 110 to 130 basis points compared to 2018. Excluding restructuring charges from the comparable prior period, we now expect an increase of approximately 90 to 110 basis points (versus previous expectation of 70 to 90 basis points) compared to 2018 adjusted gross margin due to ongoing supply chain initiatives and additional channel mix benefits.
- Operating income is now expected to reach the high end of the previously given range of approximately of $230 million to $235 million.
- Interest and other expense, net is expected to be approximately $30 million.
- Effective tax rate is expected to be approximately 22 percent.
- Earnings per share is now expected to reach the high end of the previously given range of approximately of $0.33 to $0.34.
- Capital expenditures are now expected to be approximately $180 million versus the previously expected $210 million.
Under Armour (NYSE: UAA) stock price history
The image below obtained from Google, shows the stock price history of Under Armour over the last 5 years. And its been a very miserable time for Under Armour stockholders. 5 years ago the stock of Under Armour was trading at around $33.50 a stock and its currently trading at $17.14 a stock. That's a loss of -48.8% suffered by Under Armour stockholders over the last 5 years.
The stock of Under Armour is trading at a lot closer to its 52 week low of $16.52 than it is to its 52 week high of $27.72 a stock, which to us is a clear indication that the short term sentiment and momentum of Under Armour stock is very negative at this point in time,
The stock of Under Armour is trading at a lot closer to its 52 week low of $16.52 than it is to its 52 week high of $27.72 a stock, which to us is a clear indication that the short term sentiment and momentum of Under Armour stock is very negative at this point in time,
Recent coverage of Under Armour
The extract below discusses the latest worrying news regarding suspected accounting irregularities at Under Armour as obtained from TheStreet.com
Bragar Eagel & Squire, P.C., a nationally recognized shareholder law firm, is investigating potential claims against Under Armour, Inc. (NYSE: UA, UAA) on behalf of Under Armour stockholders. Our investigation concerns whether Under Armour has violated the federal securities laws and/or engaged in other unlawful business practices.
On November 3, 2019, the Wall Street Journal reported on U.S. Justice Department and Securities and Exchange Commission investigations into Under Armour's accounting practices and related disclosures. These investigations are focused on whether Under Armour shifted sales from quarter to quarter to appear more profitable
Bragar Eagel & Squire, P.C., a nationally recognized shareholder law firm, is investigating potential claims against Under Armour, Inc. (NYSE: UA, UAA) on behalf of Under Armour stockholders. Our investigation concerns whether Under Armour has violated the federal securities laws and/or engaged in other unlawful business practices.
On November 3, 2019, the Wall Street Journal reported on U.S. Justice Department and Securities and Exchange Commission investigations into Under Armour's accounting practices and related disclosures. These investigations are focused on whether Under Armour shifted sales from quarter to quarter to appear more profitable
Under Armour (NYSE: UAA) stock valuation
So what do we value Under Armour stock at after the release of their 3rd quarter 2019 earnings report? Based on Under Armour earnings report our valuation models provides a target (full value) price for Under Armour at $14.20 a stock. We therefore believe that the stock of Under Armour is overvalued.
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $14.20 therefore we believe a good entry point into Under Armour stock is at $12.80 or below. We expect the stock of Under Armour to continue its downward slide especially after the news regarding the group being investigated for accounting malpractices and being suspected of cooking their earnings reports.
Since Under Armour is trading at well above our suggested entry price and the investigations into accounting malpractices taking place we rate the stock of Under Armour as AVOID
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $14.20 therefore we believe a good entry point into Under Armour stock is at $12.80 or below. We expect the stock of Under Armour to continue its downward slide especially after the news regarding the group being investigated for accounting malpractices and being suspected of cooking their earnings reports.
Since Under Armour is trading at well above our suggested entry price and the investigations into accounting malpractices taking place we rate the stock of Under Armour as AVOID
Next earnings release of Under Armour
It is expected that Under Armour will publish their 4th quarter and full year earnings for their 2019 fiscal year in early February 2020