Under Armour Posts Largest Share Gain In 10 Years After Q3 Beat

Under Armour Inc UAA shares gained 27.71 percent to $23.23 Tuesday after the apparel maker reported a big third-quarter earnings beat.

What Happened

The Baltimore-based athletic apparel brand reported Q3 earnings of 25 cents per share, beating estimates by 12 cents. Under Armour sales came in at $1.443 billion, beating estimates by $33 million. The company sees 2018 sales up 3-4 percent and raised its full-year EPS guidance.

"Our third-quarter results demonstrate that our multiyear transformation is on track," Under Armour Chairman and CEO Kevin Plank said in a statement.

"As we work through this chapter, we are staying sharply focused on our brand by connecting even more deeply with our consumers while delivering industry-leading innovative products and premium experiences. Coupled with increasingly greater business discipline and resulting efficiencies, we continue to gain confidence in our long-term path and ability to deliver for our consumers, customers and shareholders."

Why It's Important 

Under Armour’s turnaround may finally be taking hold after the company was surrounded by muted sentiment for quite some time. Under Armour saw its biggest share gain in 10 years Tuesday.

Cowen analyst John Kernan maintained a Market Perform rating on Under Armour and raised the price target from $18 to $21 after the Q3 print. 

Under Armour has executed on reducing inventory in North America, giving Cowen confidence on the gross margin and free cash flow outlook into next year, the analyst said. 

“Management’s vision of improved go-to-market processes, tighter segmentation by channel and storytelling around the brand’s emerging franchises creates additional optimism around the investor day in December,” Kernan said. 

What’s Next

Under Armour’s North American sales are still struggling a 2-percent decline in the quarter, but Kernan said its margin profile in North America is improving. Planned promotional days in North America are down by one-third in 2018 and SKU count is down 40 percent.

Under Armour will focus on storytelling around emerging franchises entering the holiday season and 2019, which should create improved brand heat, the analyst said. 

Off-price liquidation is also largely behind the brand heading into 2019, according to Cowen. 

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