Under Armour Earnings: New CEO Enthusiasm Tempered by Disappointing Fiscal 2024 Outlook

Under Armour wrapped its (March-ended) fiscal 2023 with mixed fourth-quarter results that were close to our expectations. However, its shares fell a mid-single-digit percentage on the report due to a disappointing fiscal 2024 outlook for flat to slightly up sales and EPS of $0.47-$0.51 (our pre-report estimates were 4% sales growth and $0.63 in EPS). The firm guided to a weak start to the fiscal year due to the high inventories (up 44% at year-end) that will necessitate discounting. We expect to reduce our fiscal 2024 estimates on this outlook but do not expect to make any material change to our $15.50 per share fair value estimate. While sales growth and margin improvement under new CEO Stephanie Linnartz may not be apparent until fiscal 2025, we view Under Armour, trading at a low-double-digit P/E on trailing earnings, as very undervalued. We rate it as a no-moat firm but also believe it has competitive strengths, including its position as a premium athletic brand. In addition, its financial position remains solid, as it closed fiscal 2023 with more cash ($712 million) than long-term debt ($675 million) despite a difficult year.