What Happened:
Shares of athletic apparel company Under Armour (NYSE:UAA) jumped 19.6% in the afternoon session after the company reported second-quarter earnings results. Under Armour blew past analysts' constant currency revenue expectations. Its EPS also outperformed Wall Street's estimates. Moving on, full year EPS guidance was above expectations, which was icing on the cake. Zooming out, we think this was certainly a solid quarter.
Is now the time to buy Under Armour? Access our full analysis report here, it's free.
What is the market telling us:
Under Armour's shares are quite volatile and over the last year have had 13 moves greater than 5%. But moves this big are very rare even for Under Armour and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 3 months ago, when the stock dropped 11.6% on the news that the company reported first-quarter earnings results. The big news is a restructuring that Under Armour is initiating. To explain the rationale of the restructuring, the company's CEO stated that "Due to a confluence of factors, including lower wholesale channel demand and inconsistent execution across our business, we are seizing this critical moment to make proactive decisions to build a premium positioning for our brand, which will pressure our top and bottom line in the near term". Because of this, Under Armour provided full-year guidance that was well below expectations for sales and EPS, as the company will have to endure some shorter-term pain to rightsize the business for the longer term.
In addition, revenue came in roughly in line with expectations during the quarter, reflecting some of the concerns management called out. North American revenue fell -10% year on year, while sales in the international business grew 7%. However, the trend is expected to continue as the full-year FY'2025 sales guidance includes expectations for a 15% to 17% decline in North America, while the International business is expected to record a low-single-digit percent decline. Amidst the new developments, management demonstrated the focus on returning value to shareholders by announcing the repurchase of up to $500 million of its common stock over the next three years. Overall this was a challenging quarter for the company, given the weak near term outlook.
Under Armour is down 10.5% since the beginning of the year, and at $7.76 per share it is trading 17.4% below its 52-week high of $9.40 from December 2023. Investors who bought $1,000 worth of Under Armour's shares 5 years ago would now be looking at an investment worth $368.36.
When a company has more cash than it knows what to do with, buying back its own shares can make a lot of sense–as long as the price is right. Luckily, we’ve found one, a low-priced stock that is gushing free cash flow AND buying back shares. Click here to claim your Special Free Report on a fallen angel growth story that is already recovering from a setback.