Truist Securities has maintained a Hold rating for Under Armour (NYSE:UA), Inc. (NYSE: UAA) with a steady price target of $8.00.
The sportswear company's shares dipped 3% after market close as it revealed plans to incur additional restructuring charges estimated at around $70 million in fiscal years 2025 and 2026. This decision follows their move to shut down a major distribution center in Rialto, California by March 2026.
The forthcoming charges add to the previously projected $70 million to $90 million, bringing the total expected restructuring costs to between $140 million and $160 million for the two fiscal years.
Despite these new charges, which will reduce the company's forecasted fiscal year 2025 GAAP operating loss by approximately $25 million to between $220 million and $240 million, they are considered one-time expenses.
Consequently, Under Armour has preserved its prior operating income forecast for fiscal year 2025 at $140 million to $160 million, along with its adjusted earnings per share guidance of $0.19 to $0.22.
Under Armour's decision to close the distribution facility is part of a broader restructuring initiative. The company has been focusing on strategic efforts to revitalize its brand and improve its market position. These efforts are aimed at driving sustainable sales growth and enhancing profit margins in the long term.
In other recent news, Under Armour reported a surprising profit in its first quarter which led to an upward revision of its annual profit forecast. This positive development was attributed to a strategic shift toward selling higher-margin items and reducing inventory. Notably, Under Armour announced executive changes and decisions made at its recent Annual Meeting of Stockholders. Eric J. Aumen will assume the role of principal accounting officer from October 1, 2024, reporting directly to CFO David Bergman. Stockholders approved the company's executive compensation and passed a proposal to amend and restate the Class C Employee Stock Purchase Plan.
Analysts have displayed differing outlooks on Under Armour. Telsey Advisory Group and Williams Trading have increased their price targets to $8 and $10 respectively. However, Morgan Stanley (NYSE:MS) downgraded the stock from Equalweight to Underweight, setting a new price target of $4 due to concerns about limited growth prospects and potential negative earnings per share revisions. UBS maintained its Buy rating on Under Armour shares, keeping its price target steady at $11.
Under Armour's strategic changes and restructuring efforts have been recognized by multiple analysts. The company has embarked on an 18-month restructuring plan, aiming to reposition its brand in the U.S. market.
The plan includes a 25% reduction in product count and a strategy to decrease promotional activities to enhance the brand's value. Despite facing a highly competitive landscape and settling a 2017 shareholder class action lawsuit for $434 million, these are the recent developments for Under Armour as it navigates the competitive sportswear market.
InvestingPro Insights
Under Armour's recent market performance and analyst outlooks reflect a period of significant transition for the company. According to InvestingPro Tips, despite the stock experiencing a notable decline over the past week, 19 analysts have revised their earnings expectations upwards for the upcoming period. This suggests a cautious optimism among experts regarding Under Armour's potential to rebound. Additionally, while the company has not been profitable in the last twelve months, analysts are predicting a return to profitability this year. It's also worth noting that Under Armour operates with a moderate level of debt and its liquid assets exceed short-term obligations, indicating a level of financial resilience amidst its restructuring efforts.
From a data perspective, Under Armour's market capitalization stands at $3.17 billion, with a forward P/E ratio for the last twelve months as of Q1 2025 at 16.52, which may be appealing to value investors. The PEG ratio, which measures the stock's price relative to its earnings growth rate, is 0.31, suggesting the stock may be undervalued based on its growth prospects. However, the company's revenue growth has seen a decline of 5.15% over the last twelve months as of Q1 2025, emphasizing the challenges it faces in driving sales. The gross profit margin remains strong at 46.36%, which could be a positive indicator for future profitability as the company continues its restructuring plan.
These insights, coupled with additional InvestingPro Tips available at https://www.investing.com/pro/UAA, can help investors better understand the complexities of Under Armour's current position and future potential. With the company's strategic initiatives underway, these metrics and insights will be key in evaluating its trajectory in the competitive sportswear market.
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