Under Armour Stock Split a Performance Boost to Investors

by Marc Bastow | June 12, 2012 8:20 am

Under Armour Stock Split a Performance Boost to Investors

UnderArmour185 150x150 Under Armour Stock Split a Performance Boost to InvestorsUnder Armour (NYSE:UA[1]) announced Monday that its board of directors has approved a two-for-one stock split of its outstanding common stock. But that’s simply another feather in the cap of founder Kevin Plank, and a shout-out to shareholders that UA[2] will “protect their house” while broadening the company’s investor base.

For those either not in the know — or those who are unconverted Nike (NYSE:NKE[3]), Adidas (PINK:ADDYY[4]) or Reebok devotees — Under Armour is a developer, marketer and distributor of branded performance apparel, footwear and accessories for men, women and children.

The original goal of Plank’s vision was to keep athletes cool, dry and light throughout the course of a game, practice or workout. Today that vision is easy to see and understand: Wear UA’s HeatGear when it’s hot, ColdGear when it’s cold and AllSeasonGear between the extremes.

You can find it all at any of UA’s 25,000 retail outlets, and see it on players in professional golf, football, baseball and basketball, not to mention on any street or playground, particularly on the East Coast.

What does that all mean to UA shareholders?

Since going public six years ago, UA shares have risen more than 300% amid a rapid rise in revenue and profit. The company now is worth roughly $5.5 billion, with 2011 revenue of $1.54 billion, and profitability of $98 million. UA’s most recent compound annual growth rate of 31% is surpassed by a 44% compounded net income rate.

Just like the company’s top- and bottom-line growth, the stock has soared in 2012 — UA shares are up 44% year-to-date and hit a 52-week intraday high of $106.87 on news of the split before resting slightly down at $102.74.

What’s going right? Pretty much everything.

First-quarter 2012 revenue and profitability was higher than analyst expectations[5] (and marked its eight consecutive quarter of growth), with apparel net revenues up 23%, driven by performance across its apparel businesses and introductions of innovative new apparel like ColdBlack and Armour Bra.

The company expects 2012 net revenues in the range of $1.78 billion to $1.80 billion, representing growth of 21% to 22% over 2011, and operating income in the range of $203 million to $205 million, representing growth of 25% to 26% over 2011.

UA’s most recent marketing venture is a 10-year deal with the hometown Baltimore neighbor that includes naming rights for the Ravens’ practice facility in Owings Mills, Md., which will be renamed the Under Armour Performance Center.

Not to mention product innovation, marketing ventures and partnerships, and channel expansion always is afoot in UA’ expanding retailing empire.

With so few stock splits announced so far in 2012[6], Under Armour’s announcement — its first stock split since it went public in November 2005 — is a welcome relief to retail investors who were hoping to get into UA at a price point well below its current sticker. Existing shareholders saw an announcement-day “pop,” as the stock jumped nearly 3% at the open (though eventually cooled by the bell), but it could see another around July 9, when the split is expected to occur.

The split also could lead to Under Armour’s entrance into the S&P 500[7] — the company’s market cap and revenues are in line with the rest of the index, according to Dow Jones Newswires — which could help fuel more demand through inclusion in several index funds.

Marc Bastow is an Assistant Editor at InvestorPlace.com. As of this writing he did not hold a position in any of the aforementioned securities.

Endnotes:
  1. UA: http://studio-5.financialcontent.com/investplace/quote?Symbol=UA
  2. shout-out to shareholders that UA: http://investorplace.com/2012/05/5-steady-businesses-in-investorplaces-backyard-ua-nke-mar-dhr-wpo/
  3. NKE: http://studio-5.financialcontent.com/investplace/quote?Symbol=NKE
  4. ADDYY: http://studio-5.financialcontent.com/investplace/quote?Symbol=ADDYY
  5. was higher than analyst expectations: http://investorplace.com/2012/04/under-armour-earnings-beat-spurs-breakout/
  6. so few stock splits announced so far in 2012: http://investorplace.com/2012/06/the-stock-split-blues-ko-goog-dltr-aapl-amzn-pcln/
  7. entrance into the S&P 500: http://www.foxbusiness.com/industries/2012/06/11/under-armour-stages-stock-split/

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