Under Armour, Inc. UAA reported break-even earnings per share in the first quarter of 2018, which compared favorably with the Zacks Consensus Estimate of a loss of 5 cents and the year-ago loss of a cent.

Following robust demand in Europe, the Middle East and Africa (EMEA), Asia-Pacific and Latin America, the company’s top line increased 5.9% to $1,185.4 million, beating the consensus estimate of $1,122 million. In the past three months, the company’s shares have surged 30.1%, compared with the industry’s gain of 7.5%.

Apparel sales rose 7.1% to $766.3 million, while Footwear net revenues inched up 0.8% to $271.8 million in the quarter under review. Net revenues in the Accessories category were up 3.4% to $92.2 million, while Licensing revenues rose 8.8% year over year to $26.3 million. Moreover, the company’s Connected Fitness segment reported a year-over-year increase of 34.4% to $28.8 million.

Under Armour, Inc. Price, Consensus and EPS Surprise

 

Under Armour, Inc. Price, Consensus and EPS Surprise | Under Armour, Inc. Quote

 

North America net revenues dropped 0.4% to $867.5 million, while the same from EMEA, Asia-pacific and Latin America jumped 23.4%, 34.6% and 21% to $126.9 million, $115.6 million and $46.5 million, respectively.

Also, gross margin contracted 120 basis points (bps) to 44.2% due to aggressive inventory management that offset favorable foreign exchange fluctuation. Adjusted gross margin shrunk 60 bps to 44.8%.

Other Financial Details

Under Armour ended the quarter with cash and cash equivalents of $283.6 million, up 64.8% from the prior-year quarter. Long-term debt was $758.7 million compared with $784.1 million a year ago. Shareholders’ equity at the end of the quarter was $2,017.7 million.

2018 Guidance

Management reaffirmed the full-year 2018 outlook. The company expects 2018 revenues to increase by low single-digit percentage rate. While revenues from North America are likely to decline by mid-single-digit, international revenues are likely to increase more than 25%. The Zacks Consensus Estimate for revenues is pegged at $5.11 billion.

This Zacks Rank #3 (Hold) company continues to anticipate adjusted gross margin growth of nearly 50 basis points to 45.5%. This improvement can be attributed to lower promotional activity, product costs, channel mix as well as variation in foreign currency.

Adjusted operating income is expected around $130-$160 million. The company projects interest expenses of about $45 million. Capital expenditures are anticipated to be nearly $225 million, compared with $275 million in 2017.

Management expects adjusted earnings per share in the range of 14-19 cents per share. The Zacks Consensus Estimate is pegged at 17 cents per share, which is well within the company’s guided range.

Stock to Consider

Tailored Brands, Inc. TLRD has a long-term earnings growth rate of 16.5% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Cherokee Inc. CHKE has a long-term earnings growth rate of 15% and a Zacks Rank #2 (Buy).

Michael Kors Holdings Limited KORS has a long-term earnings growth rate of 7% and a Zacks Rank #2.

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