Under Armour Analysts Jolted by ‘Abysmal’ 2020 Financial Outlook

(Bloomberg) -- “Disappointing” is one way to describe the financial projections that triggered a 19% plunge in Under Armour Inc.’s shares. CFRA Research analyst Camilla Yanushevsky has another word for them: “abysmal.”

The company shocked the market Tuesday when it forecast 2020 earnings of 10 to 13 cents a share, compared with Wall Street’s estimate of 46 cents. Sales are expected to decline by low single-digits. Under Armour also said it’s exploring restructuring initiatives that could result in $325 million to $425 million in pre-tax charges for 2020.

Under Armour “has largely missed out in the athleisure trend and continues to lose share to the likes of Nike and Lululemon,” Yanushevsky wrote in a research note Tuesday.

B.Riley FBR analyst Susan Anderson, who recommends selling the shares and has the lowest price target on Wall Street at $12, said she doesn’t think Under Armour will even be able to reach the depressed 2020 financial targets.

“It will be difficult for UAA to meet topline guidance through quality growth given UAA’s lack of premium positioning, space losses, lower off-price sales, and lower overall industry athletic growth,” Anderson wrote in a research note, referring to the company by its stock ticker. Earnings estimates may also be tough to meet if management is not able to go through with its restructuring plan, she wrote.

Under Armour is facing huge headwinds as its largest market, North America, continues to see sales deteriorate at an accelerating rate. Meanwhile, management said on the conference call that it’s possible the coronavirus outbreak “could have have a significant material impact both financially and operationally” on full-year results.

Cowen & Co. analyst John Kernan said the 2020 outlook shows shows a “massive deterioration” in Under Armour’s financial model. This is “a difficult amount of information to get our hands around,” he wrote in a research note Tuesday.

Kernan, who rates the stock market perform, reduced his price target to $15 from $17. The shares are expensive “on every future metric,” he said.

To contact the reporter on this story: Janet Freund in New York at jfreund11@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Richard Richtmyer

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