Under Armour Analysts React To Fifth Beat-And-Raise Quarter; Footwear Growth Finally A Bright Spot

The sentiment of Under Armour Inc UAA analysts is beginning to shift after the retailer

reported a much-needed first quarter sales beat Thursday. 

KeyBanc Capital Markets 

The first-quarter print points to continued momentum in Under Armour's turnaround, analyst Edward Yruma said in a Thursday note. 

Operational discipline is manifesting itself in controlled inventory, the analyst said, at negative 24 percent year-over-year — the lowest absolute number in over three years.

“We think this positions UAA well as new product (Rush, Recover, HOVR) continues to hit shelves and see strong response. Most importantly, we think the stage is set for improvements in North America as quality of sales has improved given lower off-price sales." 

Under Armour could have $1-plus in EPS power in the long-term, Yruma said. 

KeyBanc maintained an Overweight rating on the company with a $30 price target.

Wedbush

The quarterly print demonstrated progress and the company’s outlook is incrementally improved, analyst Christopher Svezia said in a Friday note, adding that the key to further multiple expansion is a North American sales inflection “for which the timing remains uncertain.”

Under Armour has the opportunity to improve its quality of sales in North America, but the road toward driving meaningful improvement in sales growth and brand heat in the region is a long one, the analyst said. 

“There also needs to be further signs of product differentiation in the market and for retailers to respond more proactively to the brand in the face of intensifying competitive dynamics."

Wedbush maintained a Neutral rating with a $20 price target.

Credit Suisse 

Analyst Michael Binetti said he expected more gross margin upside given the fact that inventory was down 24 percent year-over-year.

The analyst said he has confidence in Under Armour's guidance for gross margin acceleration due to "the most impactful innovation in years" launching in the second and third quarters, as well as projections of direct-to-consumer headwinds reversing in the second quarter.

Credit Suisse maintained a Neutral rating with a $26 price target. 

Wells Fargo 

Under Armour continues to make progress on its turnaround with its fifth straight beat-and-raise quarter and several key metrics moving in the right direction, analyst Tom Nikic said in a Thursday note. 

Under Armours footwear business, which has long been considered one of the company’s biggest opportunities, grew a solid 8 percent in the quarter, driven by HOVR, the analyst said. 

Nikic said the biggest hole he can poke in the quarter is the direct-to-consumer channel, as revenues declined 4-5 percent in constant-FX.

“So all in, we think UAA remains an interesting ‘self-help’ margin story, but given uncertainty around the top-line inflection and a loft valuation, we remain at Market Perform.”

Wells Fargo maintained a Market Perform rating with a price target lifted from $20 to $22.

Price Action:

Under Armour shares were down 0.35 percent at $22.74 at the close Friday. 

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