On Friday, BofA Securities updated its outlook on shares of Under Armour (NYSE:UA), Inc. (NYSE:UAA), raising the price target to $9.00 from the previous $8.00 while maintaining a Neutral rating on the shares. The adjustment follows Under Armour's first-quarter performance, which surpassed expectations with an adjusted earnings per share (EPS) of $0.01, defying the predicted loss of $0.08. This achievement was attributed to higher sales in North America and Europe, coupled with improved gross margins.
The management at Under Armour has reiterated its fiscal year 2025 (F25) sales guidance, anticipating a low double-digit decline, but has slightly increased its F25 EPS forecast by $0.01, bringing the range to $0.19-0.22. This update includes the second-quarter EPS guidance of $0.18-0.20.
In response to these developments, BofA Securities is adjusting its F25 EPS estimate upwards by $0.03 to $0.21. The revised estimate takes into account the stronger than expected first-quarter results and the favorable second-quarter guidance, which together outweigh a more cautious outlook for the second half of the year.
The improved second-quarter guidance is partly due to a strategic decision to defer some marketing expenses to the latter half of the year and a projected $0.05 benefit from an anticipated insurance recovery in Selling, General & Administrative expenses (SG&A).
BofA Securities' revised price objective of $9 reflects a multiple of 10 times enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA), up from the previous multiple of 8 times. This change is intended to mirror the early indications of a turnaround in Under Armour's business performance.
In other recent news, Under Armour, Inc. has reported a 10% decrease in its first quarter fiscal 2025 revenue, totaling $1.2 billion, alongside an operating loss of $300 million. Despite these challenges, the company has highlighted a gross margin improvement and a robust cash position of $885 million. Under Armour continues to focus on its "Protect This House" strategy, aiming to enhance its market position and financial performance through brand repositioning and operational optimization.
The company is also shifting its marketing approach, emphasizing full-price selling and storytelling to boost brand affinity. In addition, Under Armour is expanding its influencer marketing and collegiate partnerships, which includes a new agreement with USA Football. Operational enhancements are underway, with a focus on supply chain modernization and direct-to-consumer improvements.
For the fiscal year 2025, Under Armour anticipates revenue declines but expects improvements in gross margin and adjusted operating income. The company also predicts that year-end inventory will align with fiscal 2024 levels. These recent developments present a comprehensive picture of Under Armour's strategic efforts to navigate current challenges and strengthen its market position.
InvestingPro Insights
As Under Armour (NYSE:UAA) navigates through its business turnaround, real-time data from InvestingPro provides a broader perspective on the company's financial health and market position. With a market capitalization of $3.3 billion, Under Armour operates with a moderate level of debt and has liquid assets that exceed short-term obligations, according to InvestingPro Tips. These factors are essential for the company's stability and potential growth, especially when considering the strategic financial decisions highlighted by BofA Securities.
InvestingPro Data shows that Under Armour's price-to-earnings (P/E) ratio stands at 13.32, with an adjusted P/E ratio for the last twelve months as of Q1 2025 at 17.25. This valuation metric is crucial for investors gauging the company's earnings relative to its share price. Moreover, the company's revenue for the last twelve months as of Q1 2025 was approximately $5.57 billion, despite a revenue decline of 5.16%. The gross profit margin during the same period was a robust 46.36%, which aligns with the improved gross margins mentioned in the article.
InvestingPro Tips also indicate a significant return over the last week, with a price total return of 17.59%, and a strong return over the last month at 12.08%. These metrics suggest a positive short-term investor sentiment, which may align with BofA Securities' price target raise. For those seeking a deeper dive into Under Armour's financials and market predictions, InvestingPro offers additional tips and insights. Currently, there are 7 more InvestingPro Tips available that can provide investors with a more comprehensive analysis of Under Armour's potential.
It is worth noting that analysts have revised their earnings downwards for the upcoming period, but they predict the company will be profitable this year. This juxtaposition of short-term challenges and long-term optimism is critical for investors to consider when evaluating Under Armour's trajectory. To explore these dynamics further, investors can access more expert analysis and metrics by visiting InvestingPro's dedicated page for Under Armour at https://www.investing.com/pro/UAA.
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