Time to Get Out of This Stock While We Still Have the Football
The company crushed earnings expectations. Yeah, right. Let's 'get the heck out of Dodge' as it nears our price target.
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A number of our "Stocks Under $10" names have had rough weeks. Today, with the market admittedly running, we have a winner that is now approaching our price target.
Under Armour (UA) (UAA) released its fiscal third-quarter financial results on Friday morning and the results were solid. For the period ended December 31, the company posted adjusted EPS of $0.09. Wall Street had been looking for something more like -$0.01.
It posted revenue of $1.328 billion. While this sales number was only good enough for a year-over-year contraction of 5%, the total also beat what Wall Street had in mind.
Readers may remember, in late January, we increased our price target to $7.50 from $7.00. Friday, the stock is up roughly 15%, having traded with a $7 handle.
Operations
While revenue for the quarter contracted 5% to $1.328 billion, the cost of goods sold grew 0.3% to $735.884 million. That left a gross profit of $589.74 million (+4.2%) on a gross margin of 44.4%, down from 47.5%. Tack on ordinary operating expenses of $664.54 million and restructuring charges of $74.98 million resulted in a GAAP operating loss dropped of $149.78 million versus GAAP operating income of $13.509 million. Aside from those restructuring changes, Under Armour adjusted for the impacts from litigation and the impacts from its provision for income taxes.
After accounting for interest, other income & expenses and taxes, GAAP net loss printed at $430.827 million, versus GAAP net income of $1.234 million. This included a $270.604 million income tax expense. That works out the -$1.01 per fully diluted share of Class A, B, and C common stock down from the year-ago comp of $0.00.
After all of those adjustments, which seem a bit much to me, fully diluted EPS printed at $0.09, up from the year-ago comparison of $0.08. Just like magic. Voila!
Guidance
For the fiscal full year, Under Armour is now guiding towards revenue "growth" of -4%, up from period guidance of -4% to -5%. Gross margin is expected to decline by 190 basis points, up from prior guidance for a contraction of 190 to 210 basis points. This is being touted as positive guidance. Thank goodness algorithms are stupid.
The company sees its full-year operating loss at $154 million, down from prior guidance of -$56 million to -$71 million. Diluted GAAP loss per share is projected at $1.24 to $1.25, while adjusted EPS is seen at $0.10 to $0.11. That is up from the prior outlook for $0.03 to $0.05.
Yeah, I've Heard Enough
I'm getting out of the stock. The guidance is, in a way, an improvement. The results are still awful, but once salted and peppered enough, taste okay.
I'm getting us the heck out of this name while we still have the football.
Does the chart look a little overdone for a company that's still losing money hand over fist and expects that to continue? If you were long this one with me, we're up 15% on the day and almost 31% on the position.
At this time, I am cancelling my $7.50 target. My original $7.00 target was correct. I am getting the heck out of Dodge City. Sold to you.
At the time of publication, Guilfoyle was long UA equity.
