Can Under Armour (UAA) Turn In Another Earnings Beat?

Our preview of the upcoming week's earnings reports includes Under Armour (UAA) and Etsy (ETSY).

A referee holds an Under Armour basketball
(Image credit: Getty Images)

We're in a busy stretch for corporate earnings, and in the week of Aug. 2-6, investors will start to get a closer look at how consumers were spending their money in the second quarter. That's because several retail-related names are set to report their quarterly financial results.

Among them is Under Armour (UAA (opens in new tab), $20.45), which is scheduled to tell all in the earnings confessional ahead of the Tuesday, Aug. 3, open.

UAA shares had a strong start to 2021, entering the year trading near the $17 per-share mark before climbing all the way up to annual-high territory above $26 by May.

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This notable milestone was hit the day after the athletic apparel maker's first-quarter earnings report, in which it revealed better-than-expected adjusted earnings per share (EPS) of 16 cents compared to a loss in the year prior. Revenues of $1.3 million – up 35% year-over-year (YoY) – were also higher than analysts were projecting. In addition, the company lifted its full-year forecast, with CEO Patrik Frisk citing "a solid balance sheet and well-managed inventory."

While shares have pulled back dramatically since then, analysts are upbeat this earnings report will continue to show growth in UAA's top and bottom lines.

uaa price chart 072921

(Image credit: YCharts)

"We expect Under Armour's second quarter will surpass guidance and Street expectations on rebounding domestic sales, and project an 80%-plus increase in North American sales translating to revenue slightly ahead of 2019 levels," William Blair analysts Sharon Zackfia and Tania Anderson say.

But while the analysts are encouraged by Under Armour's first-half rebound, they maintain a Market Perform (Hold) rating on UAA shares. Their concern? The stock's enterprise value is roughly 20 times the research firms 2022 EBITDA (earnings before interest, taxes, depreciation, and amortization), suggesting it could be expensive at the moment.

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Deutsche Bank analysts "see upside to gross profit margin and the top line driven by a favorable pricing environment and pent-up demand for the back-to-school season." They maintain a Buy rating on UAA shares with a $31 price target, representing expected upside of 52% over the next 12 months or so.

Overall, the consensus EPS estimate for UAA's second quarter is for 5 cents, compared to a per-share loss of 31 cents in the year ago period. Revenues are projected to surge 70.6% year-over-year to $1.2 billion.

Will Etsy Impress Amid Tough Comps?

Etsy (ETSY (opens in new tab), $198.98) shares sold off dramatically in the wake of the company's first-quarter earnings report. Despite beating estimates on both the top and bottom line, the company warned its second-quarter results would show a slowdown in gross merchandise sales (GMS), or the volume of goods sold. This is because of tough year-over-year comparisons due to the popularity of the online marketplace during the early stage of the pandemic.

The shares have rebounded since then and are currently up about 12% for the year to date. And given the negative reaction to ETSY's GMS warning back in May, it could be that the negative news has already been priced in.

Jefferies analyst John Colantuoni says ETSY's second-quarter guidance has been a "key overhang" on the stock. "Our analysis of historical results suggest that traffic growth in April and May (29% average) indicates there is upside to the second-quarter consensus given actual GMS growth has on average been nearly double traffic growth in the last two years," he adds.

And following the stock's sharp decline since March, ETSY represents a "compelling buying opportunity." He maintains a Buy rating on the shares.

Etsy's second-quarter report is due out after Wednesday's close. The consensus estimate among analysts is for the retailer to report earnings of 63 cents per share, a roughly 16% decline from what it took in a year ago. Its top line is forecast to have increased 22.4% year-over-year to $524.8 million.

Karee Venema
Contributing Editor, Kiplinger.com

With over a decade of experience writing about the stock market, Karee Venema is an investing editor and options expert at Kiplinger.com. She joined the publication in April 2021 after 10 years of working as an investing writer and columnist at Schaeffer's Investment Research. In her previous role, Karee focused primarily on options trading, as well as technical, fundamental and sentiment analysis.