Analyst: Under Armour Makes 'Splash'; Reiterating Buy

In a report published Wednesday, BB&T Capital Markets analyst Corinna L. Freedman maintained a Buy rating on Under Armour Inc (NYSE: UA), with a price target of $93. The company's first quarter results showed continued strong performance of footwear and international momentum.

UA reported Q1 EPS of $0.05, reflecting higher-than-expected Footwear revenues. "We estimate a $0.07 dilution related to Connected Fitness (not including associated debt/interest) however we continue to be comfortable with underlying momentum in the core business, particularly in Footwear and International," Freedman said.

Gross margins in the quarter were lower than expected. The miss was on account of higher freight, currency headwinds and softer Retail revenues. Freedman expressed optimism regarding Under Armour's performance for the remainder of the year, citing "the temporary nature of these items."

The company raised its revenue growth rate guidance from 22 percent to 23 percent, while also noting an upward revision in its EBIT assumptions to reflect more favorable expenses related to its recent acquisitions.

The revenue estimate for FY15 has been raised from $3.76B to $3.79B. Freedman expects modest gross margin expansion of about 30 bps.

"Should the Golden State Warriors' Steph Curry (as well as his "Splash Brother" teammate Klay Thompson) continue to advance in the playoffs, we would anticipate continued momentum of the Curry 1 in Q2 - establishing a solid foundation for basketball legitimacy," Freedman commented.

"We would take advantage of the pullback in the shares ahead of the Golden State Warriors' likely advancement in the playoffs and the Sept. analyst meeting which we anticipate will highlight an increase in the company's 5Y outlook," the report added.

Longer-term, the company's performance is expected to be propelled by Footwear expansion and international brand opportunities.