Under Armour’s Stock Surges on Footwear and Double-Digit Sales Growth

Under Armour Inc.’s earnings slam-dunk might rival that of its NBA-superstar-endorsee Stephen Curry.

The firm’s stock price has been soaring all day, up as much as 9 percent, on the heels of its second-quarter earnings release which showed 29 percent gains, 31 percent currency-neutral, in revenue. Those gains were bolstered by a 40 percent year-over-year jump in footwear, driven by the success of Curry’s signature shoe.

While Under Armour’s Q2 performance blew past Wall Street’s forecast, the slam-dunk doesn’t mean a complete win for the Baltimore, Md.-based firm. Increases in expenses are likely driving down profits—which declined 17 percent in the quarter.

Still, a bullish Under Armour CEO Kevin Plank said he’s focused on capitalizing on the firm’s momentum and “thinking bigger.”

Under Armour also endorses principal ballerina Misty Copeland and PGA golfer and 2015 Masters Champ Jordan Spieth.

The firm also raised its guidance for the year.

Net Income: Net income decreased 17 percent in the second quarter, ended June 30, 2015, to $15 million compared with $18 million in the prior year’s same period.

EPS: Diluted earnings per share were 7 cents compared with 8 cents per share in the same year-ago quarter.

Net Revenue: Net revenues increased 29 percent year-over-year to $784 million compared with net revenues of $610 million in the prior year’s same-period. On a currency neutral basis, net revenues increased 31 percent year-over-year.

Hit, Miss or Beat: Under Armour beat Wall Street’s estimates for both revenues and EPS in Q2. Analysts polled by Yahoo Finance had predicted EPS of 5 cents and revenues of $762.2 million.

Executive Insights: “We have delivered 21 consecutive quarters of 20-plus percent revenue growth. We are growing in key areas like footwear, women’s and international. And doing so, while investing in new opportunities like Connected Fitness, which we believe will be critical to our continued growth. And most importantly, we have the capacity to adapt, to change course, and accelerate investments when the opportunity calls for it and to think bigger about what the Under Armour brand can eventually be.” –CEO Kevin Plank, Q2 Conference Call

Looking Ahead: The Company had previously anticipated 2015 net revenues of approximately $3.78 billion, representing growth of 23 percent over 2014, and 2015 operating income in the range of $400 million to $408 million, representing growth of 13 percent to 15 percent over 2014. The firm said it now expects 2015 net revenues of approximately $3.84 billion, representing growth of 25 percent over 2014 and 2015 operating income in the range of $405 million to $408 million, representing growth of 14 percent to 15 percent over 2014. The 2015 guidance continues to reflect the net dilutive impact from the Connected Fitness acquisitions, as well as the impact of FX.

Analyst Insights: “The core men’s domestic wholesale business remains strong, but growth will be driven by women’s & kids’ apparel, footwear, DTC, and international expansion. The brand, and its management, is sacrosanct. Marketing investments are accelerating to support the brand and its growth. The acquisitions of new digital platforms and ongoing innovation will continue to enhance the Under Armour brand’s relationship with athletes. Guidance will continue to increase as the year progresses.” –Sam Poser, Sterne Agee CRT analyst

“While guidance continues to include planned dilution from Connected Fitness and FX headwinds, Under Armour’s press release indicates that the guidance raise also comes despite plans to be more aggressive on marketing around digital and Under Armour athletes following recent success. We still think potential upside could come from faster growth in footwear; accelerating growth in international; increased square footage for UA women’s and youth apparel at Dick’s; and continued market share opportunities in newer categories.” –Kate McShane, Citi Research analyst

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