Founded in 1996, Under Armour Inc. (UA) has quickly become a major player in the sports apparel and footwear industry. With a growing presence on all seven continents, the company has gained significant market share over the last decade. Under Armour has endorsement deals with top athletes including Tom Brady (NFL MVP), Stephen Curry (NBA MVP), Carey Price (NHL MVP) and Clayton Kershaw (MLB MVP).
Under Armour is one of only two companies in the S&P 500 that has reported 22 consecutive quarters with over 20% year-over-year growth in revenue. Under Armour’s annual revenue has grown from $17,000 in 1996 to $3.08 billion in 2014.
For 3Q15, the company had net revenues of $1.20 billion, up about 28% from 3Q14.
Under Armour reported net income of $100.5 million, or $0.45 per share, up 13% year-over-year, and beat analyst estimates on revenue by 3% and on EPS by 2%. Management updated full-year 2015 guidance, increasing revenue estimates by 2% to $3.91 billion, representing top line growth of about 27% from FY2014. Operating income is estimated to be $408 million for the full year, near the high-end of management’s previous operating income guidance.
Under Armour continues to aggressively expand its alliances and marketing deals, including:
• A $96 million agreement with the University of Wisconsin.
• An extension of its endorsement deal with Auburn University (the first university to sign a deal with Under Armour).
• A new partnership with WWE superstar and famed actor Dwayne ‘The Rock’ Johnson, which will likely be leveraged with the company’s connected fitness application segment.
• This should grow the company’s app base of 150 million registered users and allow for a seamless introduction into connected devices, smartwear apparel and food & nutrition markets.
• An extension of its endorsement partnership with NBA superstar Stephen Curry through 2024.
Through various business development initiatives, management plans to double revenue to about $7.5 billion by 2018, with a strong emphasis on expanding the brand globally. To push revenue growth over the next 3 years, Under Armour aims to establish 2,000 shop-in-shops and grow to 800 stores. Management predicts that 18% of net revenues will come from international markets by 2018, up from 11% in 3Q15.
With a mean price target of $107 and a high price target of $130 (upside of 19% and 45% respectively), Under Armour shares should bounce back from their current slump and deliver solid capital gains over the coming years, as the company grows its global brand.
Todd Johnson, Dividend Lab, www.dividendlab.com, 505-514-0036, November 30, 2015