It has been about a month since the last earnings report for Under Armour (UAA Quick QuoteUAA - Free Report) . Shares have lost about 15.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Under Armour due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Under Armour Q3 Earnings Top Estimates, EPS View Raised

Under Armour delivered robust third-quarter fiscal 2023 results as the top and bottom lines improved year over year and beat the Zacks Consensus Estimate. Encouragingly, this Baltimore, MD-based player raised its bottom-line view for fiscal 2023 while keeping the revenue guidance unchanged.

Revenue & Earnings Picture

Under Armour reported adjusted earnings of 16 cents a share, which beat the Zacks Consensus Estimate of 9 cents. The figure ascended 14.3% from the adjusted earnings of 14 cents a share reported in the year-ago period.

Meanwhile, net revenues of $1,581.8 million came ahead of the Zacks Consensus Estimate of $1,548 million and increased 3.4% on a year-over-year basis. The metric grew about 7% on a currency-neutral basis.

While wholesale revenues increased 6.8% year over year to $819.8 million, direct-to-consumer revenues fell 0.7% to $715.2 million due to a 6% drop in owned and operated store revenues. E-commerce revenues increased 7% and represented 45% of the total direct-to-consumer business.

Let’s Delve Deeper

By product category, Apparel revenues edged down 2.1% year over year to $1,075.7 million, while Footwear revenues increased 25.3% to $354.4 million. Revenues from the Accessories category declined 1.7% to $104.9 million. Meanwhile, Licensing revenues tumbled 18.8% to $29.7 million.

Net revenues from North America declined 2.4% to $1,037.6 million. Meanwhile, revenues from the international business increased 14.2% (up 24.4% on a currency-neutral basis) to $527 million.

Within the international business, net revenues from the EMEA jumped 32.5% to $265.3 million. Revenues from the Asia-Pacific fell 8.8% to $198 million, while revenues from the Latin American region grew 44.9% to $63.8 million.

The company’s gross margin shrunk 650 basis points to 44.2% from the prior-year period due to increased promotions, an unfavorable mix (associated with increased distributor and footwear revenues) and adverse foreign currency movements. SG&A expenses declined 11% to $604 million.

The company’s operating income came in at $95 million. Under Armour’s operating income came in at $86.1 million in the comparable year-ago period, while the adjusted operating income was $100.3 million.

Other Financial Details

Under Armour ended the quarter with cash and cash equivalents of nearly $850 million, long-term debt (net of current maturities) of $673.9 million and total stockholders' equity of $1,832 million. The inventory jumped 50% to $1.2 billion. For fiscal 2023, management expects capital expenditures of approximately $200 million, lower than the previous projection of around $225 million.

During the quarter, UAA entered into accelerated share repurchase (ASR) transactions to repurchase Class C shares worth $75 million. As of the third-quarter fiscal 2023 earnings release date, 8.8 million shares have been retired under the abovementioned ASR transactions. With this, the company repurchased 35 million shares for $425 million under its two-year $500-million program (which was approved in February 2022).

FY23 Guidance

For fiscal 2023, Under Armour continues to foresee low-single-digit growth in fiscal 2023 revenues. On a currency-neutral basis, management expects revenues to be up at a mid-single-digit-percentage rate.

Management now expects gross margin contraction at the higher end of the previously guided range of 375-425 basis points compared with the baseline period's gross margin of 49.6%. SG&A expenses are now anticipated to be down in the low single digits compared with a slight decline expected earlier.

Under Armour still expects the operating income to come between $270 million and $290 million versus the comparable baseline period’s operating income of $333.4 million. Excluding an expense related to ongoing litigation matters, the company forecast the adjusted operating income in the band of $290 million-$310 million for fiscal 2023 versus the comparable baseline period’s adjusted operating income of $424 million.

Under Armour now expects adjusted earnings in the band of 52-56 cents per share, up from the previously guided range of 44-48 cents a share. The company reported adjusted earnings of 68 cents a share for the comparable baseline period.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

The consensus estimate has shifted 11.11% due to these changes.

VGM Scores

At this time, Under Armour has a strong Growth Score of A, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Under Armour has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.