Under Armor Under Pressure After Raising Guidance The market is not rewarding good results and Under Armor (NYSE: UA) is not immune. The company is deep in the throes of a restructuring effort that has the company on track for growth, outpacing the consensus, and raising guidance

No Love For Under Armor's Shining Performance

The market is not rewarding good results and Under Armor (NYSE: UA) is not immune. The company is deep in the throes of a restructuring effort that has the company on track for growth, outpacing the consensus, and raising guidance and yet the shares are down in the wake of the report. The company's valuation may have something to do with it, trading at over 100X earnings the stock is no bargain but like always, you get what you pay for. With this stock what you get is a rock-solid balance sheet, long-term growth, profitability, and an analyst community that has grossly underestimated the full-year results.

Under Armor Delivers Results In Q1 2021

Under Armor had such a great Q1 period and issued such favorable guidance we can't believe the stock isn't up double-digits because of it. The $1.26 billion in revenue is down sequentially but up 35.4% from last year and 5.0% over the last two years. The comp against last year is admittedly easy but within the data, there are signs that point to both improved profitability and sustainable growth for years to come. In regards to the analysts, the net consolidated revenue beat the consensus by 1150 basis points, and the strength was also seen on the bottom line.

Looking at the business from a segment perspective there is no area not performing above expectations right now. The wholesale channels grew 35%, DTC 52%, eCommerce 69%, and strength was seen in all geographic segments as well. North American sales grew 32% YOY, International 58% and spending was spread among all three categories. Apparel sales are up 35%, Footwear 47%, and Accessories 73%, and all helping to reduce company inventory.

The strength in sales helped the company to leverage its repositioning efforts. The gross margin increased by 370 basis points to hit 50% and topped the consensus by 180 bps. On the bottom line, the company turned in an unexpected GAAP profit of $0.17 which beat by $0.18 while the adjusted $0.16 beat by $0.12.

Under Armor Gives Strong Guidance

Turning to the guidance, the company is expecting to see revenue growth in the high-teens which is both good and expects slowing in the second half of the year. The takeaways are the comps in the second half are going to be tough and the company is still forecasting double-digit growth, margins expansion, and EPS nearly double the consensus. We think this forecast may be too low in light of the economic reopening we are about to witness. It is going to be historic.

"Under Armour is off to an excellent start for the year. Our first-quarter results demonstrate that our improved operating model and investments we're making to amplify our connection with consumers are enabling us to deliver against strong demand for our brand," said Under Armour President and CEO Patrik Frisk. "Additionally, with a solid balance sheet and well-managed inventory, we're confident in our ability to drive well through 2021 as we get back on offense and make measured progress to returning to sustainable, profitable growth over the long-term."

The Technical Outlook: Under Amor Falls, Support Present

Shares of Under Armor pulled back more than 2.5% in the wake of the Q1 release and may fall further. The caveat is that support is already showing itself at the 30-day EMA so if prices do fall more, it may not be very much. A move below the EMA may take the stock down to the $18 level where support is likely to be much stronger. A move below there is not expected but you never know. Assuming that support at the moving average is strong enough to keep the trend rising, we see this stock moving up above the $20 level fairly soon and continuing to rise into the end of the year.

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