by Ian Harvey
February 12, 2020
Under Armour falls short of analysts' expectations!
Earnings Prediction Members make potential profits of 199% on a put options trade within 2 days of executing the trade. More profit is expected!
A year ago UAA introduced an ambitious five-year turnaround plan, but is still facing significant headwinds.
Wall Street has continued to show a lack in confidence over the brand’s ability to weather persistent challenges in North America and some analysts expressed concerns over its announcement yesterday that it might need to restructure this year — a plan that would cost the company hundreds of millions of dollars.
“To thoroughly execute a strategic, operational and cultural transformation of this magnitude takes time,” president and CEO Patrik Frisk said in the company’s fourth-quarter earnings call. “And, quite simply, the realization of milestones and progress within certain areas of our business is taking longer than we anticipated.”
Shares for Under Armour Inc. were down by double-digit percentages in premarket trading after the sportswear giant posted disappointing fourth-quarter sales and noted a negative impact to its outlook as a result of the deadly coronavirus outbreak.
As of 8:45 a.m. ET on Tuesday, the firm’s stock was down more than 14% to $15.57.
By the close of trading, UAA was down 18.88% to sit at $16.59; and after the market closed this downward trend continued to finish the session down 19.22% at $16.52.
YOU NEED TO BE IN TO PROFIT!
The Recommended Trade – sent Sunday, February 09, 2020…..
Baltimore-based athletic apparel and accessories maker Under Armour Inc. (NYSE:UAA) will report earnings before the market opens. The consensus earnings estimate is $0.10 per share on revenue of $1.47 billion; but the Whisper number is a little better at $0.12 per share.
Consensus estimates are for year-over-year earnings growth of 11.11% with revenue increasing by 5.76%.
Under Armour stock took a hit in early November after the company reported a set of mixed numbers with a positive earnings surprise and a small revenue miss. The stock has recovered from its November selloff, with shares trading sideways so far in 2020 ahead of the upcoming quarterly report.
The biggest problem facing the stock at this point is its valuation. UAA trades at a high 81 times past earnings and 43 times future earnings.
Coronavirus is also likely to weigh on Under Armour, which has also seen great gains in China recently. (Under Armour doesn’t break out its China sales, but Asia-Pacific has been its biggest growth market in many recent quarters.)
Under Armour saw its U.S. sales decline. Under Armour’s North America sales have declined five quarters in a row; the last time the brand saw growth in the U.S. was Q2 2018.
And BMO Capital Markets analyst Simeon Siegel doesn’t think the picture is going to get better.
“At the end of the day, Under Armour probably has meaningful opportunity internationally, but it looks like they’ve hit a peak in the U.S.,” Siegel says. “This is not a broken brand story... it just seems that they’ve peaked.”
American consumers know Under Armour, and are passing it over for other brands. It simply isn’t a growth story anymore in the U.S., after years of being a challenger underdog on a (26 consecutive quarters of 20% revenue growth) hot-streak.
Option trade to consider: Buy the UAA FEB 21 2020 20.000 PUT at approximately $1.20.
(This trade opened at $1.17.)
The Earnings Report…..
For the three-month period ended Dec. 31, adjusted earnings per share were in line with analysts’ expectations of 10 cents on losses of $15.3 million, compared with profits of $4.2 million a year ago. However, revenues came in lower than consensus bets of $1.47 billion, growing 4% to $1.44 billion.
Further, Under Armour issued softened guidance, forecasting a sales hit of roughly $50 million to $60 million in the first quarter due to the coronavirus. The death toll has already surpassed 1,000 in mainland China, where the illness originated, and has infected more than 43,000 around the world.
Armour is an operationally better company following our transformation over the
past few years, with a clearly defined and focused strategy, enhanced
go-to-market process, cleaner inventories and a stronger balance sheet,”
president and CEO Patrik Frisk said in a statement. “However, ongoing demand challenges and the need to drive greater
efficiencies in our business requires us to further prioritize our investments
to put our company in the best position possible to achieve sustainable,
profitable growth over the long-term.”
Under Armour Providing Potential Profits.....
After entering the put options trade on Monday morning at $1.17, Under Armour reported earnings on Tuesday morning before the market opened; and Earnings Predictions Members were up 199% by close of trading.
Join us today and see what future trades will be recommended!
Under Armour sees 2020 revenue down in the low-single digits, with North America sales down in the mid- to high-single digits. The overall sales estimate assumes a $50 million to $60 million hit in Q1 2020 due to the coronavirus. Under Armour expects 2020 EPS should be 10-13 cents, including a 1-2 cent hit from the company's equity investment in its Japan licensee. That's well below analyst views for Under Armour earnings per share of 47 cents.
Factors Effecting Under Armour Stock.....
Under Armour has consistently faced heavy competition from athletic rivals Nike and Adidas as well as heavily depends on wholesale partners such as Kohl’s — and Sports Authority, which went bankrupt in 2016 — that have seen challenges amid a changing retail environment. The Baltimore-based company continued to see lagging demand in North America during the fourth quarter despite expectations of “stabilization” by the end of last year and a “pivot back to growth” this year.
Under Armour revealed that it was embarking on a restructuring plan that could add about $325 million to $425 million of pre-tax charges this year — with approximately $225 million to $250 million of that amount related to giving up plans to open a flagship store in New York City.
The company issued softened guidance, forecasting a sales hit of roughly $50 million to $60 million in the first quarter due to the coronavirus, with nearly 600 Under Armour stores in China currently closed.
Analysts’ Skeptical About Under Armour.....
Analysts are skeptical about Under Armour following the earnings call. Camilla Yanushevsky, a CFRA analyst, maintained a "sell rating" for Under Armour shares and lowered her price target to $15. She said Under Armour's "growth narrative is broken" and does not think the company will be able to meet long-range financial targets.
“While investors were braced for a cautious 2020 guide, the magnitude of the sales/margin shortfall will challenge confidence prior to 2023 plans,” said Baird analysts prior to the call.
Baird rates Under Armour stock neutral with a $20 price target.
BMO Capital Markets is even more downbeat, rating the stock underperform with an $18 price target.
“With fiscal 2020 sales expected down low-single digits, it is growing increasingly clear Under Armour is no longer a growth story,” Simeon Siegel wrote in a note.
The question remains......Will Under Armour Continue Its Downward Trend?
or, Will Under Armour Overcome The Negative Factors And Bounce Back?
For answers, join us here at Stock Options Made Easy, and get the full details on the next trade.
AS ALWAYS THE DECISION IS YOURS!
An Important Note: That any suggestions for options trade considerations require investors/traders to use their own discretion as to when to enter or exit! As well, it is advisable to do further research and due diligence before executing your trade.
It is sometimes best to exit a trade, if there is already sufficient profit accrued, before an earnings report is presented. GREED can be the undoing of a nice profit!