Under Armour’s Q4 Could Be ‘Lackluster,’ But Analysts Eye Long-Term Growth

Despite weather challenges, a significant stock pullback and a few downward-adjusted targets, analysts are generally optimistic aboutUnder Armour Inc. ahead of Thursday’s Q4 earnings release.

Although Canaccord Genuity Inc. analyst Camilo Lyon acknowledged that November and December’s unseasonably warm temperatures are likely to negatively impact UA’s Q4 numbers, he said he continues to anticipate that the company will perform well in 2016.

While we believe the holiday season was challenging for brands and retailers alike, Under Armour inclusive, we believe weather (not an issue with the brand or its positioning) was the significant driver of what is likely to be a lackluster quarter,” Lyon wrote Monday. “We continue to view Under Armour as a ‘once-in-a-generation brand’ with multiple growth opportunities in its path.”

Footwear led the Baltimore, Md.-based company to its first billion-dollar quarter in Q3, and Lyon said the category could also offset losses in winter apparel in Q4.

But concerns over a dismal holiday season for retail and weather woes have been key factors in driving down the firm’s stock recently. On Jan. 20, UA shares hit a 52-week low of $63.23, a far cry from their 52-week high of $105.89, reached in September.

However, the pullback in the stock presents an attractive buying opportunity, Lyon said, reiterating his buy rating on Monday.

Similarly, Stern Agee CRT analyst Sam Poser maintained a buy rating on the stock, noting on Jan. 11 that “nothing is fundamentally wrong.”

Still, Poser had to reduce his price target and Q4 estimates, citing “balmy weather over the holiday shopping season.”

Poser dropped his 4Q15 earnings-per-share estimate from 49 cents to 44 cents and now expects revenue to increase 23.1 percent year-over-year, compared with his initial projection for revenue growth of 26.7 percent.

Under Armour’s fundamental long-term growth prospects are intact, and the bad news for 4Q15 is reflected in the stock price, which has been cut by 25 percent over the past three months,” Poser wrote. “Under Armour is positioned to achieve a three-year revenue [compound annual growth rate] of at least 25 percent through 2018.”

Lyon predicts EPS of 45 cents in Q4, below consensus estimates of 47 cents.

Looking ahead to the rest of 2016, Lyon said he expects footwear, international (Europe and Asia), a deeper expansion of outdoor apparel and greater Connected Fitness monetization to drive revenue growth by upwards of 25 percent.

In the third quarter, Under Armour’s revenues increased 28 percent, to $1.20 billion, and profit advanced 13 percent, to $100 million.

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