Growth Seeker holding Under Armour (UA) will be under the microscope tomorrow following the release of its latest quarterly results before the market opens. The burgeoning company is on a mission to reach $10 billion in annual revenue by 2020, about double the amount the company expects to earn in 2016.
International growth prospects in Asia and Europe as well as the launch of its UAS casual-wear line, which will see the Baltimore-based company stepping off the playing field and entering the fickle world of high fashion, will surely be scrutinized by investors
But besides the top and bottom lines -- estimates are for Under Armour to report revenue of $1.46 billion, yielding earnings of $0.25 per share -- analysts will be looking for the company to confirm reports that it has reached a deal to outfit Major League Baseball with team uniforms beginning in 2020.
Under Armour has done a great job of increasing its brand visibility in recent years, thanks to the success of its stable of athlete endorsers including NBA MVP Stephen Curry, NFL MVP Cam Newton and MLB National League MVP Bryce Harper. Under Armour's sneaker segment accounts for about 20% of the company's revenue, an impressive jump from just five years ago when Under Armour wasn't known for footwear at all.
Curry's line of sneakers has been especially lucrative for the company, with the shoe's success coinciding with the basketball ascent of Golden State Warriors' point guard. The third iteration of his shoe, the Curry 3, is also slated for release tomorrow.
Looking forward, Piper Jaffray analyst Erinn Murphy noted that Under Armour historically provides preliminary guidance for the next fiscal year during its third-quarter conference calls and anticipates that management could lowball estimates this time around. Murphy believes Under Armour will guide near 23% sales growth and leave themselves with room to raise those estimates during the year.
Retro Wall Street creator and Real Money contributor Timothy Collins wrote today that there are two strategies for investors looking to sell heading into Under Armour's earnings call tomorrow, noting that short interest in the company is unusually high.
While Collins is still a believer in the company, he notes the stock has been "somewhat reactionary post-earnings." He notes that the eight days following Under Armour's earnings reports tend to be relatively volatile, and is leaning toward a short iron condor targeting a move in the 3.5% to 4.5% range.
As for the second strategy, Collins wrote that, "The strategy here would be a calendar spread targeting strangles about $4 out-of-the-money in both directions, going long the Nov. 4 expiration and short the Oct. 28 expiration. ... UA has only experienced moves over 10% two times in the past nine reports. But if we review the eight-day moves, we'll find the stock has hit double-digits four times."
Under Armour has been a solid growth story for the last couple of years, but cracks in the company's armor have been appearing as the charge from the closing of The Sports Authority -- one of the company's retail partners -- ended up being more than the company anticipated. But the bulls are ready to run ahead of the holiday season if Under Armour has the quarter they expect it to have.