Factors Setting The Tone For Under Armour (UAA) Q3 Earnings

Under Armour, Inc. (NYSE:UAA) is scheduled to report third-quarter 2019 financial numbers on Nov 4, before the opening bell. We note that the bottom line of this Baltimore, MD-based company has surpassed the Zacks Consensus Estimate in the trailing four quarters. Investors are counting on another beat by this athletic apparel maker in the to-be-reported quarter. If all goes well, this will be the eighth and fifth straight quarter of top and bottom-line beat, respectively.

The Zacks Consensus Estimate for third-quarter earnings is pegged at 18 cents, down from 25 cents reported in the year-ago quarter. We note that the Zacks Consensus Estimate has been stable in the past 30 days. The consensus estimate for revenues stands at $1.41 billion, suggesting a decline of approximately 2.4% from the year-ago quarter.

Key Things to Note

In the last earnings call, Under Armour guided revenue decline of 2-3% for the third quarter. The projection took into account reduced sales to the off-price channel, softness in direct-to-consumer business, and unfavorable timing of distributor sales in international regions.

Sales decline in North America business has been a major concern. Net revenues from North America fell 3.2% in the last reported quarter owing to decline in both wholesale and direct-to-consumer businesses. For the third quarter, the company forecasted revenue decline in mid-single digit range in North America business.

For the third quarter, the company envisioned gross margin expansion of approximately 120-140 basis points, primarily on account of channel mix benefits with lower off-price sales, and supply chain initiatives including lower air freight and product cost improvements.

The company estimated operating income in the range of $115-$120 million and earnings between 17 cents and 18 cents a share for the quarter under review. These projections indicate decline from adjusted operating income of $143 million and adjusted earnings of 25 cents a share reported in the prior-year period. The impact of lower revenues as projected, any deleverage in SG&A expenses and adverse currency fluctuations might get reflected in the bottom line.

A Sneak Peek into the Fundamentals

Under Armour has been progressing well with its multi-year transformation plan and remains focused on strengthening brand through enhanced customer connections, effective innovations and strict go-to-market process. We also anticipate the company to continue gain from technology-based fitness businesses. In order to harness benefits from growth areas, the company consistently invest in the direct-to-consumer, international, women's and footwear businesses. In fact, international business remains one of the key catalysts. In the last earnings call, the company projected growth in mid-single-digit range in international revenues for the third quarter.

What the Zacks Model Unveils

Our proven model predicts an earnings beat for Under Armour this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Under Armour has a Zacks Rank #2 and an Earnings ESP of +9.37%.

3 More Stocks With a Favorable Combination

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

Boot Barn Holdings (NYSE:BOOT) has an Earnings ESP of +4.13% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Children's Place (NASDAQ:PLCE) has an Earnings ESP of +17.24% and a Zacks Rank #3.

Ralph Lauren Corporation (NYSE:RL) has an Earnings ESP of +0.67% and a Zacks Rank #3.

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