Under Armour (NYSE:UA), a leading sports equipment producer, is set to reveal its fiscal Q2 results today. The company expects a stock surge following the announcement, as revenues and earnings are projected to surpass consensus estimates, despite the difficulties posed by a highly promotional North American retail market.
The firm is seeing strong growth in Europe, Middle East, Africa, and Asia Pacific, with these regions predicting double-digit sales growth for FY'24. This international success comes as the company navigates challenges in North America, where high inventory levels and intense competition have posed hurdles.
The new CEO's strategies to manage these high inventory levels and rejuvenate the North American market are predicted to bolster Under Armour's stock price in H2. A key focus for FY'24 is margin enhancement, with targets set below FY'21's 50.3% but aiming for an increase of 25 to 75 basis points from FY'23's 44.9%.
Looking back over the past three years, Under Armour's stock has fallen by 55%, dropping from $15 in early January 2021 to current rates. This contrasts with a roughly 15% increase in the S&P 500 over the same period. Despite this decline, Trefis analysts forecast Under Armour's valuation at $8 per share—20% above the current market price.
Trefis estimates for Q2 2024 put Under Armour's revenues and EPS at around $1.6 billion and 23 cents, respectively—both figures exceed consensus estimates. This follows Q1 results where revenues fell by 2% year-on-year to $1.32 billion due to high inventory levels causing gross margin pressure within the fiercely competitive apparel retail sector.
InvestingPro Insights
InvestingPro's real-time data and expert tips provide additional insights into Under Armour's financial health and performance. Currently, Under Armour is trading at a low earnings multiple, with a P/E ratio of 7.79. This suggests that the stock may be undervalued, potentially offering an attractive entry point for investors.
InvestingPro's data also indicates that Under Armour's liquid assets exceed its short-term obligations, demonstrating the company's ability to cover any immediate liabilities. This is a positive sign for the company's financial stability.
Furthermore, despite the stock's volatility, analysts predict that Under Armour will be profitable in the coming year. In the last twelve months leading up to Q1 2024, the company reported a gross profit of $2.63 billion and a revenue growth of 2.57%.
InvestingPro Tips also highlight that Under Armour operates with a moderate level of debt and does not pay a dividend to its shareholders. These factors could be significant for potential investors, depending on their individual investment goals and risk tolerance.
With over 100 additional investing tips available on InvestingPro, investors can gain an in-depth understanding of Under Armour's performance and potential.
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