Can Under Armour Get Back To Meeting Expectations?

Under Armour Inc UAA is having a tough 2017. With shares down 35 percent year-to-date, Baird Equity Research analysts are suggesting that investors may be best served to remain patient in the near term.

With expectations that are dramatically lower, Baird is hopeful that Under Armour can gradually get back to meeting/exceeding expectations, “as efforts re-focus behind key sales and margin initiatives eventually take hold.”

A Return To Met Expectations

Given well-noted challenges the company is facing, investors appear to be braced for soft first-quarter results when the company reports earnings on April 27. Baird is placing even greater focus on management’s tone and confidence in the company’s outlook, which appears to be acting with a greater sense of urgency given considerable headwinds.

“While sales and margin initiatives likely will take time to impact the business, we have been pleased by recent signs that UA is re-focusing around the core business, re-setting key platforms, and hopefully increasing speed to market for newer platforms, including efforts to bolster the lifestyle offerings that lag peers," said Baird analysts.

Baird Equity research is modeling flat apparel growth in Q1, but is aiming for 20 percent footwear growth, which would still be the lowest growth quarter since early 2011.

Despite the near-term challenges facing Under Armour, Baird expects the stock to bounce back and return to exceeding dramatically lowered expectations. “With valuation no longer reflecting a sizable premium relative to Nike Inc NKE, we are sticking with UA.”

Baird Equity Research maintains an Outperform rating on Under Armour with a $25 price target.

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