3 Takeaways From Under Armour's Q2 Print

Under Armour, Inc. UAA released its second-quarter earnings report Friday, and the results “beat a low bar,” according to Needham.

The Under Armour Analyst: Rick Patel maintained a Hold rating on Under Armour.

The Under Armour Thesis: Under Armour’s second-quarter performance beat some expectations, Patel said in a Friday note. (See his track record here.)

The analyst named three key takeaways:

• The revenue and gross margin were higher than expected.

Second-quarter sales totaled $707.6 million, outpacing both Needham and Street estimates of $535.9 million and $573.3 million, respectively.

“GM% was +280bp to 49.3% vs our/consensus ests. of (300bp)/(335bp),” the analyst said.

It is “good to see UAA beating expectations but the bar was also very low,” he said.

• The guidance was on par.

Under Armour “guided second-quarter sales to decline 50%-60%; given particularly low visibility, our forecast (as well as consensus) was at the mid-point of guidance,” Patel said.

“This proved conservative and UAA is ‘encouraged by some of the momentum’ experienced in June and July,” he said.

• Under Armour's potential upsides, risks. 

Potential upsides include re-acceleration in North America, stronger-than-expected growth and margin expansion.

Risks include high expectations, increasing competition in activewear, low demand for new products, continued weakness in North America and international deceleration, the analyst said.

“We anticipate stronger growth abroad,” he said. There is “progress being made, but not enough to see significant upside to estimates.” 

UAA Price Action: Class A Under Armour shares lost 8.12% in Friday's session, ending at $10.52. 

Benzinga file photo by Dustin Blitchok. 

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