UAA Solid 3Q. UAA with a solid headline beat with EPS at 31 cents vs consensus at 15 cents. Revenue beat by 5% growing 8% YY and 8% above 2019 slowing from +13% last Q. Apparel was up 14% YY and 7.4% ahead of 2019, trends in footwear were strongest up 10.2% YY and up 31.6% vs 2019 accelerating from +20.6% last Q. Gross margin was well ahead of expectations accelerating to +310 bps benefitting from pricing an mix with some offset from the exit of MyFitnessPal and supply chain headwinds. Inventories remain lean down 20% YY, so outlook remains bullish for gross margins. Management is taking up guidance, with revenue up 25% for the year vs prior low 20s, implying 4Q about 3% ahead of consensus. Full year EPS to $0.74 vs prior $0.50 to $0.52, implying a few cents ahead of consensus that was expecting $0.00, and management is likely leaving room for another beat. So the year probably ends up in the $0.80+ range. We’re coming out a 0.93 cents for the year and tail EPS around $1.20. We went long UAA in March of last year around $11 and raised our conviction a year ago yesterday with the stock in the low teens. In 2021 our call has been the clear EPS upward revision cycle with sales ramping from improving performance in UA footwear and the company improving the cost structure. EPS estimates for 2021 have now going from $0.15 at the start of the year, and should end it around $0.80. Footwear is showing quality growth, the company is removing low/no return marketing spend and it’s improving its quality of distribution by culling bad wholesale doors. These all mean a more profitable UAA and a stable growth model, that’s worth about $30 on a typical UAA premium PE multiple around 30x. The big call to be made on UAA is a return of real brand heat for Under Armour, that would put and $80 stock in play, but the time for that call is not today, as we don’t see the data points or demand creation spend to suggest such an acceleration in brand heat is coming any time soon. That leaves a small variance between consensus EPS and where we are coming out and only moderate upside to the stock of about 20% or so. We’re taking this well down the list on our Long Bias list, but remain net bullish.
