Tuesday, Seaport Global Securities maintained a Neutral rating on stock of Under Armour (NYSE:UA), Inc. (NYSE: UAA). The firm's analyst commented on the company's guidance for a weak second quarter in 2025, attributing it largely to a lackluster wholesale outlook. Despite an uptick in global search volume for Under Armour during the second quarter, the United States showed a decline.
Under Armour, which is set to report its second-quarter earnings for 2025 on Thursday, October 7th, has indicated that both sales and EBIT are expected to be subdued. The analyst noted that although year-over-year search volume was slightly weaker than the previous quarter, it showed strength in the latter eight weeks following the first quarter report.
The first five weeks of the third quarter, however, have seen a downturn in year-over-year search volume, falling below second-quarter levels. The company has projected that the sales trend will not see a significant improvement from the first half to the second half of the fiscal year.
Despite these challenges, the analyst suspects that Under Armour may have exceeded its expectations for the second quarter, given that demand trends likely fared better than anticipated when the guidance was issued. Nevertheless, the start of the third quarter might be experiencing a slower pace, as suggested by the recent search volume data.
In other recent news, Under Armour has seen notable developments. Analysts have shown varying perspectives, with TD (TSX:TD) Cowen increasing its price target for the company due to stable brand preference. BMO (TSX:BMO) Capital also raised its target, citing the potential for significant earnings growth due to Under Armour's new strategy, "Achieve More by Doing Less." However, concerns about weak North American sales led Citi to maintain a neutral stance. Morgan Stanley (NYSE:MS) downgraded the stock due to concerns about limited growth prospects.
Under Armour reported a surprising profit in its first quarter, leading to an upward revision of its annual profit forecast. This success is attributed to a strategic shift toward selling higher-margin items and reducing inventory. However, the company plans to incur additional restructuring charges estimated at around $70 million in fiscal years 2025 and 2026, following their decision to shut down a major distribution center in Rialto, California.
In terms of executive changes, Eric J. Aumen will assume the role of principal accounting officer from October 1, 2024. These developments are part of Under Armour's broader restructuring initiative aimed at revitalizing its brand and improving its market position. These are the recent developments for Under Armour as it navigates the competitive sportswear market.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Under Armour's financial position and market performance. Despite the challenges highlighted in the article, the company's stock has shown strong momentum, with a 35.64% price return over the last three months and a 28.19% return over the past six months. This aligns with the InvestingPro Tip that Under Armour has seen a "Strong return over the last three months."
However, investors should note that Under Armour's revenue growth has been negative, with a 5.15% decline in the last twelve months. This supports the article's discussion of weak sales expectations. The company's P/E ratio (Adjusted) for the last twelve months stands at 18.75, suggesting that despite recent stock performance, the market is still pricing in some growth expectations.
InvestingPro Tips also indicate that while Under Armour "operates with a moderate level of debt" and has "liquid assets exceed[ing] short term obligations," it has "not [been] profitable over the last twelve months." This financial snapshot provides context for the company's cautious guidance mentioned in the article.
For readers interested in a more comprehensive analysis, InvestingPro offers 7 additional tips for Under Armour, providing a deeper understanding of the company's financial health and market position.
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