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‘s first-quarter earnings could be better than expected, according to Pivotal Research Group, which continues to recommend buying the stock.
Analyst Mitch Kummetz reiterated a Buy rating on Under Armour stock (ticker: UAA) on Thursday, while raising his price target to $29 from $26.
The move comes less than a week ahead of the company’s scheduled results, due on May 4. Under Armour’s guidance for the first quarter is for sales to grow 20% year over year and earnings before interest and taxes, or Ebit, to rise $150 million. While that may seem “aggressive,” those figures actually represent declines of 7% and 1%, respectively, from two years ago, not a high bar, Kummetz writes.
The analyst says that Under Armour’s results will come in toward the high end of the company’s stated range, but there are also a “handful of reasons why the first quarter could be stronger than what Under Armour was expecting.”
First, he highlights that the company’s outlook is conservative on a two-year basis relative to the fourth quarter. In addition, earnings reports from other apparel and footwear firms have included strong trends in full-price selling, which has boosted gross margins. Other analysts have also noted that Under Armour has been less promotional lately.
The most recent round of stimulus was likely another catalyst for sales that wasn’t factored into the original guidance, Kummetz notes, while Google Trends search volume has been robust throughout the quarter. And “while only anecdotal, we believe that UAA has been an outsized beneficiary of the return of spring sports,” he concludes.
Under Armour stock was up 1.5% to $24.39 in recent trading. The shares have gained 42% year to date and are up 134% in the past 12 months.
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