Under Armour is set to report its fiscal fourth-quarter results, and analysts expect revenues and earnings to beat consensus estimates. Despite challenges in the North American retail segment, the company is experiencing strong growth in other regions such as Europe, Middle East, Africa, and Asia Pacific. Under Armour’s gross margins are expected to improve in FY’24, although they will still be below the levels of FY’21. The company’s strategic focus on direct-to-consumer channels and e-commerce could drive future growth in net sales. Share buybacks and potential further reductions in shares could also positively impact the stock price in the long term. For the full year 2024, Under Armour’s revenue is forecasted to decline by 3-4% year-over-year, with earnings per share expected in the range of $0.50 to $0.59.
UA stock has seen a significant decline over the past few years, underperforming the S&P 500 in 2021, 2022, and 2023. In comparison, the Trefis High Quality Portfolio, consisting of 30 stocks, has consistently outperformed the S&P 500 each year during the same period. With the current uncertain macroeconomic environment including high oil prices and elevated interest rates, there is speculation about whether Under Armour will continue to underperform the S&P 500 or see a recovery in the coming months. Trefis’ valuation of Under Armour suggests a price of $8 per share, which is approximately 20% higher than the current market price.
Analysts predict that Under Armour’s Q4 2024 revenues and earnings will exceed consensus estimates, with revenues estimated at $1.4 billion and earnings per share at 8 cents. In Q3, the company experienced a 6% year-over-year decline in revenues, with all segments including apparel, footwear, accessories, and licenses seeing decreases. Wholesale revenues fell by 13% year-over-year, while direct-to-consumer revenues slightly increased by 3.5%. Under Armour’s gross margins have declined from around 50% post-Covid to 45.2% in the most recent quarter due to industry inventory pressures. The company ended Q3 with inventory at $1.1 billion and $1 billion in cash and cash equivalents.
Based on Trefis’ valuation, Under Armour’s stock price estimate is higher than the current market price, with a projected EPS of 52 cents and a P/E multiple of 14.8x in fiscal 2024 translating to a price of $8. Comparisons with peers in the industry can provide insights into how Under Armour is positioned relative to its competitors. Overall, the company’s focus on improving margins, expanding direct-to-consumer channels, and reducing shares outstanding could drive long-term growth and potentially lead to a positive impact on the stock price. Investors will be watching closely to see how Under Armour performs in its upcoming earnings report and beyond.
