Let’s say you’re Under Armour (UA). You’ve just reported a profit of 68 cents, topping analyst forecasts for 66 cents. Your revenue also topped expectations and you raised your full year revenue guidance above your previous range. Your shares should be heading higher, right?
ZUMAPRESS.com Not quite. Sure the numbers looked good, but Under Armour’s stock had gained nearly 70% this year and sometimes good just isn’t good enough.
The Buckingham Research Group’s John Zolidis and Patrick O’Grady note that Under Armour’s revenue raise only brought the company’s guidance in-line with what analysts were already expecting, and its EPS guidance when to $1.40 to $1.42, from $1.37 to $1.42, below forecasts for $1.45.
Their conclusion: “…shares are ahead of themselves at current prices.” They write:
We believe the company has created an aspirational brand and is developing a product pipeline and strategy that will allow it to continue to grow at robust rates over the foreseeable future. However, we believe this outlook is more than factored into analyst estimates and the stock's valuation at current levels (47x FY14 EPS). We advise investors to be patient and wait for a better entry point.
Zolidis and O’Grady offer a better choice, too: Dick’s Sporting Goods (DKS), which is Under Armour’s largest wholesale customer.
Shares of Under Armour have dropped 5.2% to $79.59 at 1:21 p.m., while Dick’s has dropped 0.8% to $51.32. Nike (NKE) is little changed at $75.58, Skechers USA (SKX) has dropped 2.2% to $28.53 and Columbia Sportswear (COLM) has declined 0.1% to $62.75.
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