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Can Under Armour (UA) Pull a Surprise in Q3 Earnings?

Zacks

Under Armour, Inc. UA, the developer, marketer and distributor of branded performance apparel, footwear, and accessories, is slated to report third-quarter 2016 results on Oct 25. The question lingering in investors’ minds is whether the company will be able to deliver a positive earnings surprise in the quarter to be reported. In the trailing four quarters, the company outperformed the Zacks Consensus Estimate by an average of 26%. Let’s see how things are shaping up prior to this announcement.

Zacks Model Shows Unlikely Earnings Beat

Our proven model does not conclusively show that Under Armour is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Under Armour has an Earnings ESP of 0.00% as the Most Accurate estimate and the Zacks Consensus Estimate both stand at 25 cents. The company carries a Zacks Rank #3, which increases the predictive power of ESP. However, its ESP of 0.00% makes surprise prediction difficult.

Factors Influencing this Quarter


Under Armour’s sustained focus on brand development, expansion of its DTC business, product innovation and foray into the technology-based fitness business bode well, as evident from its revenue growth of over 20% for the past 25 straight quarters. At the moment, management envisions net revenue to increase approximately 20% in the third quarter and 24% in 2016.

However, Under Armour anticipates gross margin to be marginally down during third-quarter 2016 and for the full year. The company expects SG&A expense to increase approximately 28% in 2016 due to investment activities. Additionally, Under Armour projects an increase in interest expense to approximately $32 million in 2016 on account of higher debt levels. These are likely to weigh on the company’s bottom line, thus posing concerns.

UNDER ARMOUR-A Price and Consensus

UNDER ARMOUR-A Price and Consensus | UNDER ARMOUR-A Quote

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Amazon.com, Inc. AMZN has an Earnings ESP of +6.98% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Big 5 Sporting Goods Corp. BGFV has an Earnings ESP of +3.33% and also carries a Zacks Rank #1.

Avon Products Inc. AVP has an Earnings ESP of +33.33% and flaunts a Zacks Rank #1.

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