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Athletic apparel company Under Armour (NYSE:UAA) reported Q4 CY2024 results beating Wall Street’s revenue expectations , but sales fell by 5.7% year on year to $1.40 billion. Its non-GAAP profit of $0.08 per share was significantly above analysts’ consensus estimates.

Is now the time to buy Under Armour? Find out in our full research report.

Under Armour (UAA) Q4 CY2024 Highlights:

• Revenue: $1.40 billion vs analyst estimates of $1.34 billion (5.7% year-on-year decline, 4.5% beat)

• Adjusted EPS: $0.08 vs analyst estimates of $0.03 (significant beat)

• Management raised its full-year Adjusted EPS guidance to $0.29 at the midpoint, a 45% increase

• Operating Margin: 1%, down from 4.7% in the same quarter last year

• Free Cash Flow Margin: 18.8%, down from 25.6% in the same quarter last year

• Constant Currency Revenue fell 6% year on year (-7.1% in the same quarter last year)

• Market Capitalization: $3.38 billion

Company Overview

Founded in 1996 by a former University of Maryland football player, Under Armour (NYSE:UAA) is an apparel brand specializing in sportswear designed to improve athletic performance.

Apparel and Accessories

Thanks to social media and the internet, not only are styles changing more frequently today than in decades past but also consumers are shifting the way they buy their goods, favoring omnichannel and e-commerce experiences. Some apparel and accessories companies have made concerted efforts to adapt while those who are slower to move may fall behind.

Sales Growth

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Unfortunately, Under Armour struggled to consistently increase demand as its $5.32 billion of sales for the trailing 12 months was close to its revenue five years ago. This fell short of our benchmarks and signals it’s a low quality business.

We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. Under Armour’s recent history shows its demand has stayed suppressed as its revenue has declined by 4.3% annually over the last two years.

We can dig further into the company’s sales dynamics by analyzing its constant currency revenue, which excludes currency movements that are outside their control and not indicative of demand. Over the last two years, its constant currency sales averaged 3.8% year-on-year declines. Because this number aligns with its normal revenue growth, we can see Under Armour’s foreign exchange rates have been steady.

This quarter, Under Armour’s revenue fell by 5.7% year on year to $1.40 billion but beat Wall Street’s estimates by 4.5%.

Looking ahead, sell-side analysts expect revenue to decline by 3.3% over the next 12 months, similar to its two-year rate. While this projection is better than its two-year trend, it's hard to get excited about a company that is struggling with demand.

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Cash Is King

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Under Armour broke even from a free cash flow perspective over the last two years, giving the company limited opportunities to return capital to shareholders.

Under Armour’s free cash flow clocked in at $262.9 million in Q4, equivalent to a 18.8% margin. The company’s cash profitability regressed as it was 6.8 percentage points lower than in the same quarter last year, but it’s still above its two-year average. We wouldn’t put too much weight on this quarter’s decline because investment needs can be seasonal, causing short-term swings. Long-term trends carry greater meaning.

Looking forward, analysts predict Under Armour will generate cash on a full-year basis. Their consensus estimates imply its free cash flow margin of negative 2.9% for the last 12 months will increase to positive 4.4%, giving it more money to invest.

Key Takeaways from Under Armour’s Q4 Results

This was a beat and raise quarter. We were impressed by how significantly Under Armour blew past analysts’ constant currency revenue expectations this quarter. We were also excited its EPS outperformed Wall Street’s estimates by a wide margin. The icing on top was that the company raised its full-year EPS guidance. This was a strong quarter. The stock traded up 7.8% to $8.88 immediately following the results.

Under Armour had an encouraging quarter, but one earnings result doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.