Under Armour (UA)
Kevin Plank’s business is operating very effectively these days. Under Armour’s (UA) fourth quarter results were a blowout, with EPS of 59 cents — six cents better than the Capital IQ consensus estimate. Revenues increased 35% year-over-year to $683 million, which was $63 million higher than the consensus estimate.
Looking ahead to 2014, Under Armour expects to generate operating income of at least $326 million — 23% higher than in 2013. All of this put some pop in UA stock, which is good news for shareholders because until the huge jump post-earnings, it was in the hole by 2.4%.
Initially, I thought Nike (NKE) was the safer bet because UA stock has achieved annual total returns of 80%, 35%, 31%, 101% and 14% in each of the last five years, outperforming NKE on annualized basis by 28%. The gravy train has to end sometime doesn’t it? But even with the big gains Jan. 30, UA stock is just getting started in 2014.
As a company, Under Armour is hitting its stride. In 2013, it generated $2.33 billion in revenue, eclipsing $2-billion mark for the very first time while delivering the 15th straight quarter of at least 20% growth. It expects to hit $4 billion by the end of 2016.
Whether it be apparel or footwear, men’s or women’s, UA expects significant growth over the next three years. I see it blowing through that number and coming in closer to $4.5 billion by the end of 2016. At a 12% operating margin and a 37% tax rate, if it hits my high-end projection, UA stock will generate $3.15 in earnings per share in 2016 — 110% higher than today.
Of these three leisure stocks, UA stock in my opinion is the best bet from Badenhausen’s list of 37 stocks to outperform in 2014 (excluding the gains from Jan. 30). ACAT and COLM should also do well, but they won’t keep pace with UA.
As of this writing, Will Ashworth did not own a position in any of the aforementioned securities.