Under Armour, Inc. (UA: 46.50 0.00 0.00%) recently hit a new multi-year high after posting a solid 13% Q3 earnings surprise in late October. Estimates have since jumped higher, providing this Zacks #1 rank stock with a nice dose of momentum.
Company Description
Under Armour, Inc. develops and sells performance apparel for men, women and children primarily in the United States and Canada. The company was founded in 1996 and has a market cap of $2.38 billion.
We got an update on Under Armour's business on October 26 when the company reported strong Q3 results that came in ahead of expectations.
Third-Quarter Results
Revenue for the period was up 22% from last year to $329 million. Earnings also came in strong at 68 cents, 13% ahead of the Zacks Consensus Estimate, where the company now has an average earnings surprise of 52% over the last four quarters.
The good quarter was driven by Under Armour's apparel division, where sales were up 28% to $277 million on a strong showing across their men's, women's and children's lines.
The company's "direct-to-consumer" division, comprising 18% of company revenue, saw big gains, increasing 48% from last year.
Margin Expansion
Margins were also on the upswing, with operating income up $10 million to $57 million as gross margin expanded to 50.9% from 49.5%.
Strong Balance Sheet
Under Armour's balance sheet also looks great, where cash and equivalents are up $41 million to $134 million with a marginal debt load of $18.5 million.
Estimates
We saw some pretty decent movement in estimates off the good quarter, with the current year adding 8 cents to $1.25 and the next-year estimate up 12 cents to $1.55, a bullish 24% growth projection.
Valuation
In light of recent gains, the valuation picture is running a bit hot, with a forward P/E multiple of 37X against its peer average of 15X.
2-Year Chart
UA has been trending higher for most of the last 18 months, with shares currently pressuring the multi-year high at $48.59 on the good quarter. The stochastic below the chart is signaling that shares remain safely away from over-bought territory, take a look below.
Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the new Zacks Momentum Trader Service.
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