Where Under Armour Results Let Down Investors

Under Armour Inc. (NYSE: UAA) reported fourth-quarter and full-year 2018 results before markets opened Tuesday. The sports gear maker reported quarterly adjusted earnings per share (EPS) of $0.09 on revenues of $1.39 billion. In the same period a year ago, the company reported a net loss per share of $0.12 on revenues of $1.37 billion. Fourth-quarter results also compare to consensus estimates for EPS of $0.04 per share and $1.38 billion in revenues.

For the full year, Under Armour reported revenues of $5.19 billion, compared with prior-year sales of $4.99 billion. Adjusted net income rose to $0.27 on a GAAP net loss of $0.10 per share, compared to a GAAP net loss of $0.11 in fiscal year 2017.

Under Armour said that restructuring and impairment charges totaled $183 million for the year, including $204 million in restructuring charges.

In its outlook statement, the company said it expects net revenues to rise by 3% to 4% in fiscal 2019. Gross margins for the year are now forecast to improve by 60 basis points from the 2018 level of 45.1%. On an adjusted basis, EPS is now estimated at $0.31 to $0.33.

Analysts estimate 2019 EPS of $0.34 and revenues of $5.39 billion for the full year and EPS of $0.03 on revenues of $1.21 billion for the third quarter.

Referring to the restructuring, CEO Kevin Plank said:

Our 2018 results demonstrate significant progress against our multi-year transformation toward becoming an even stronger brand and more operationally excellent company. As we look ahead to 2019, our accelerated innovation agenda, disciplined go-to-market process and powerful consumer-centric approach gives us increasingly greater confidence in our ability to deliver for Under Armour athletes, customers and shareholders.

The message initially did not warm investors’ hearts. Shares traded down about 4.2% in Tuesday’s premarket, after closing at $20.78 on Monday. Yet they were last seen up about 2.7% early Tuesday to $21.35. The stock’s 52-week range is $15.60 to $24.96, and the consensus 12-month price target before the earnings announcement was $21.08.

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