Much Ado About Nothing: Under Armour's Concerns Make Reward Attractive, Mizuho Says

Under Armour Inc (NYSE: UA) is scheduled to report its 1Q results on April 21. Mizuho’s Betty Chen maintained a Buy rating for the company, with a price target of $47.50.

“Given concerns of excess inventory and slowing trends in women’s and footwear, we see a favorable risk/reward as we anticipate solid 1Q results and reiteration of FY16 and FY18 goal posts,” analyst Betty Chen wrote.

Under Armour Poised For Robust Results

Under Armour is likely to report its 1Q EPS in-line with expectations, with more seasonal weather offset partially by volatile traffic in Spring so far. Chen expects the company to post 1Q EPS of $0.02 on sales growth of 20 percent in apparel and 55 percent in footwear.

Under Armour is likely to reiterate its FY16 and FY18 sales and EBIT guidance, besides discussing its multi-pronged growth strategy aimed at expanding footwear, sportswear and women’s segments, the analyst said.

Chen added, however, that Under Armour may face gross margin pressure from elevated inventory levels of 4Q. The excess inventory is expected to be more aligned by 2H16. “We anticipate minimal receivables impact from The Sports Authority and Sport Chalet restructurings,” the Mizuho report stated.

Under Armour’s core categories continue to record solid market share gains on favorable weather patterns, compelling products, and success from brand ambassadors including Stephen Curry. Chen expects minimal receivables impact from the company’s recent wholesale client restructurings.