Under Armour, Inc. - Momentum

Under Armour, Inc. (AU) just hit a new multi-year high at $40 after reporting an awesome Q2 earnings surprise of 133% on July 27. This Zacks #1 rank stock now has an average earnings surprise of 53% over the last four quarters and a bullish next-year estimate projecting 21% earnings growth.

Company Description

Under Armour, Inc. develops and sells performance apparel and accessories for men, woman and youth primarily in the United States and Canada and internationally. The company was founded in 1996 and has a market cap of $1.93 billion.

Retailers have seen their sales boom over the last year on the back of a stronger global economy and renewed consumer confidence. That trend helped Under Armour report better than expected Q2 results on July 26 that easily beat expectations.

Second-Quarter Results

Revenue for the period was up 24% from last year to $205 million. Earnings also came in strong at 7 cents, 133% ahead of the Zacks Consensus Estimate, pushing the company’s average earnings surprise to 53% over the last four quarters.

The strong results were driven by Under Armour’s apparel division, where sales were up 34% from last year to $150 million on strength from both men and woman. The company’s direct-to-consumer revenue was also strong, up 60% driven by new Factory Store growth and its growing web business.

Under Armour also saw big gains in gross margin, expanding to 48.8% from 44.8% last year on higher margin items and lower markdowns.

Balance Sheet

Under Armour used the great quarter to strengthen its balance sheet, with cash and equivalents up $76 million to $156 million with no long-term debt.

Estimates

With Under Armour raising its guidance, analysts were quick to follow, pushing the current-year estimate 5 cents higher to $1.15. The next-year estimate is up 10 cents to $1.39, a 21% growth projection.

Valuation

After the recent string of gains, shares of UA do look a bit pricey, trading with a forward P/E of 32X, almost double its peer average of 17X.

2-Year Chart

UA hit a new multi-year high at $40 on the good quarter after trending higher for most of the last 15 months. Look for support from the trend line and breakout area between $37 and $38 on any weakness, take a look below.

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