Under Armour Posts Q4 Earnings Beat, But Analysts Unconvinced

Under Armour Inc UAA shares rose after the apparel maker reported a surprise fourth-quarter earnings beat. Still, several Wall Street analysts said in research reports that they're are unconvinced that Under Armour is an attractive buy. 

Wedbush Discouraged By Demand, Execution Concerns 

Wedbush analyst Christopher Svezia says that while the company has made laudable progress over the past year, there is no need to rush at current share levels.

“UAA posted a 4Q18 beat driven by a one-off tax benefit as the FY19 outlook, and our concerns around brand demand and execution remain unchanged," the analyst said in a Wednesday note. 

Indications of enhanced consumer demand for Under Armour are needed in order for Wedbush to become more constructive on the stock, Svezia said. 

Wedbush maintained a a Neutral rating on Under Armour with a $20 price target.

Tigress Prefers Lululemon, Nike,  VF

Tigress Financial partners analyst Ivan Feinseth said that while Under Armour reported its first positive quarter in a year, the company trades at an unsustainable valuation and at multiples double that of much stronger competitors.

“I continue to recommend Lululemon Athletica Inc. LULU, Nike Inc NKE and VF Corp. VFC over Under Armour as they represent much better values with greater upside as consumer spending on apparel continues to remain strong."

Under Armour still faces challenges in consumer trends and growing competition, the analyst said — and a brand that has become saturated and is appearing more often in discount channels. 

BofA Stays Bearish

Bank of America Merrill Lynch analyst Robert Ohmes said Under Armour is taking the right steps by doubling down on the brand's  performance heritage and setting up for its “perform with balance” period, which assumes stronger growth in North America and 10-percent EBIT margin improvement by 2023.

BofA maintained an Underperform rating and $15 price target.

UBS Sees Potential For Rebound 

UBS analyst Jay Sole said he may be underestimating Under Armour’s FY19 margin rebound potential and said the company’s self-help drivers are only just beginning to play out.

“If UAA EPS beats continue, we think it will cause the stock’s 11-percent short interest to fall and the stock to rise,” the analyst said.

Under Armour's valuation looks fair due to tariff threats and a declining top-line trend, in UBS' view. The sell-side firm maintained a Neutral rating on the stock and raised the price target from $21 to $23.

RayJay: Retailer Dependent On Asia-Pacific 

Raymond James analyst Dan Wewar continues to rate shares of Under Armour at Underperform and said the company looks overpriced.

Under Armour’s revenue growth is increasingly reliant on the Asia-Pacific region, the analyst said, adding that while this is a tailwind for profitability, it implies greater business risk given the fear of a slowing economy in China and the impact it would have on neighboring countries.

Under Armour’s international revenue in 2018 grew 23 percent but is expected to decelerate to 10-13-percent growth in 2019, Wewar said. 

Cowen: Stock Rangebound 

Cowen analyst John Kernan reiterated a Market Perform rating on Under Armour with a $21 price target. 

Under Armour’s stock and estimates are rangebound until the second half of 2019, when 100 percent of EBIT is generated, the analyst said. 

Under Armour shares were down 1.13 percent at $21.96 at the time of publication Wednesday. 

Related Links:

Under Armour Slides After Five-Year Plan Fails To Excite Investors

A Post-Sneaker World: How 'Small' Footwear Brands Are Beating The Giants

Photo by Dustin Blitchok.