Under Armour Stock Slides Upbeat Q4

The news shaping the markets today

Ireland’s Ulster Bank construction PMI surged to 56.1 in January, from an eight-month low of 53.7 in the previous month. However, the EUR/USD forex pair remained under pressure after the news.

India’s total passenger vehicles sales jumped 15.9% to 254,287 units in January, after 1.8% growth a month ago. However, the INR/USD pair declined in forex trading this morning.

US crude oil surged to a seven-year high this morning, triggered by supply concerns on Russia’s possible attack on Ukraine.

New Zealand’s services index declined to 45.9 in January, versus a reading of 49.8 in the previous month. This being the sixth straight month of contraction in the services sector exerted pressure on the NZD/USD forex pair.

The US’s University of Michigan consumer sentiment fell to 61.7 in February, hitting the lowest level since October 2011. The Dow Jones tumbled more than 500 points on Friday.

What’s happening: Shares of Under Armour fell on Friday, despite the company reporting better-than-expected earnings for its fourth quarter.

What happened: The company recorded sales growth in the quarter with a strong performance by both owned and operated stores.

Investors were disappointed, however, by management’s guidance, which sent the shares sharply lower on Friday.

How were the results: The Baltimore, Maryland-based company reported a decline in net income for the quarter ending December 31, but the figure still topped market estimates.

• Sales climbed 9% to $1.53 billion, beating the consensus estimate of $1.47 billion.
• Net income declined to $110 million, or 23 cents per share, from $184.5 million, or 40 cents per share, in the year-ago quarter.
• Excluding one-time items, earnings came in at 14 cents per share, topping Street expectations of 7 cents per share.

Why it matters: Under Armour has been restructuring its business, bringing its focus back on sports apparel and accessories.

The company reported strong results in North America, with sales surging 15% to $1.1 billion. However, the international performance was mixed, taking overall revenue higher by 3%. Although revenues in Europe, the Middle East and Africa surged 24%, Asia-Pacific and Latin America suffered a decline by 6% and 22%, respectively.

Under Armour’s apparel revenues climbed 18% to $1.1 billion, with footwear sales surging 17% to $283 million. However, revenues from accessories contracted by 27% to $107 million. The company’s wholesale revenues grew 16% year-over-year to $768 million, while direct-to-consumer revenues gained 10% to reach $720 million.

Under Armour boosted its forecast for the quarter ending March 31, projecting operating income between $30 million and $35 million on revenue growth in the mid-single-digit percentage range, higher than its previous estimate of low-single-digit growth. Management guided to earnings between 2 cents and 3 cents per share for the current quarter, while warned of headwinds from the ongoing supply constraints.

The company said it expects a contraction in orders due to supply disruptions to impact revenue growth by around 10 percentage points in the current quarter.

CFO Dave Bergman said, “We expect many of these headwinds to continue well into fiscal 2023 until longer-than-usual transit times, backlogs and congestion find balance, associated freight and logistics costs normalize, and in-bound shipping delays subside. At this time, we do expect these uncertainties to cause material impacts and variability in our future results.”

Under Armour refrained from issuing guidance for fiscal 2023, saying it will wait until May to do so.

How shares responded: Under Armour’s shares plummeted 12.5% to close at $17.51 on Friday, after the company released its quarterly results. The stock has tumbled around 18% year to date.

What to watch: Investors will keep an eye on the supply constraints impacting the industry and the company’s performance in the international markets.

The markets today

Bitcoin will be in focus today after recording losses on Friday

Context: Bitcoin fell below the important support level of $42,000 this morning, with the global cryptocurrency market being in the red.

Details: Bitcoin tumbled below $33,000 on January 24, declining more than 50% from its record high of $69,000 recorded in November last year.

The largest cryptocurrency by market cap remained under pressure, with markets widely expecting the US Federal Reserve to hike interest rates several times this year to ease the continuous acceleration of inflation.

The US annual inflation rate rose further to 7.5% in January, hitting the highest level since February 1982.

However, JPMorgan remained optimistic about Bitcoin’s performance in the long term. The global investment bank expects Bitcoin to reach $150,000 in the long term, up from last year’s projection of $146,000. JPMorgan analysts also estimate Bitcoin’s current fair value at $38,000, versus their estimate of $35,000 last year.

Bitcoin fell 1.3% to trade around $41,760 this morning, while Ethereum declined 1% to $2,845.

What to watch: Traders will continue monitoring indications from the Federal Reserve regarding interest rates.

Other Markets: US indices closed lower on Friday, with the Dow Jones, S&P 500 and Nasdaq 100 down by 1.43%, 1.90% and 3.07%, respectively.

Support & resistances for today

Market snapshot

What else to watch today

India’s wholesale price inflation rate, balance of trade, exports, imports, retail price inflation and total passenger vehicles sales, Central Bank of Brazil’s focus market readout, US consumer inflation expectations, China’s total vehicle sales and foreign direct investment, as well as Turkey’s total motor vehicles production.