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Under Armour Soars on Third Quarter Results but Nike is Still a Threat

Sport apparel company Under Armour was seeing its shares pop after the company reported third quarter results. Under Armour was up nearly 25% after reporting third quarter revenue of $1.443 billion while analysts were expecting $1.41 billion.

Net income for the quarter also jumped 40% to hit $75.3 million, or 17 cents a share. Earnings per share of 25 cents was significantly higher than the 13 cents that analysts were expecting.

Looking ahead, the company has also upped its guidance for the full year. Under Armour expects 2018 adjusted earnings per share to be 19 to 22 cents. Previously the company had projected a range of 16 to 19 cents.

Chairman and CEO Kevin Plank stated, “As we work through this chapter, we are staying sharply focused on our brand by connecting even more deeply with our consumers while delivering industry-leading, innovative products and premium experiences. Coupled with increasingly greater business discipline and resulting efficiencies, we continue to gain confidence in our long-term path and ability to deliver for our consumers, customers and shareholders.”

While the earnings were good and the outlook was raised, Nike still remains a threat to the company. Neil Saunders, managing director of GlobalData Retail, wrote in a note, “Footwear has been a particular area of challenge and here we believe that Under Armour has lost significant market share to Nike NKE, +3.21% , which has been more innovative and focused with its product strategy.”

Footwear revenue was flat at $285 million, Under Armour Chief Financial Officer David Bergman said on the company’s earnings call.

CFRA analyst Camilla Yanushevsky noted that Under Armour stock is “overvalued at current levels.” She wrote, “While we commend Under Armour’s impressive international sales growth and focus on tightening inventory, which decreased 0.6% to $1.2 billion in Q3, much progress in SKU [storekeeping unit] rationalization and reviving the North America segment remains to be made.”

Cowen however did raise their price target from $18 to $21 with analyst Jonathan Komp rating the tock “outperform” with a $27 price target. “The results demonstrate Under Armour’s ongoing progress toward becoming a more operationally excellent company.”

Equities researchers at B. Riley lowered their fourth quarter 2018 earnings estimates a day after the company’s report. B. Riley analyst S. Anderson now expect the company will post earnings of $0.00 per share for the quarter, down from their prior estimate of $0.11. B. Riley currently has a “Sell” rating on the stock.

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