Under Armour (UA) shares have been creating a bit of a buzz this week, and for good reason.
The company announced a 2-for-1 stock split on Monday and investors jumped on the stock. It was the company’s second stock split (the first was in June 2012) since it became a public company back in 2005.
The split will occur on April 14 and be distributed to shareholders of record on March 28.
While the stock split itself does not really mean much as it simply cutting the pie into additional pieces UA shares deserves increased attention right now. The company has been on fire with earnings growth the past five years of more than 30%, with its most recent quarter showing year over year profit growth of 25%.
They show strong sales growth of 35% in the past quarter and 26% over the past five years, and looking ahead analysts expect the company to see profit growth of more than 23% over the next five years.
Based in Baltimore, Md., Under Armour experiments with synthetic fabrics to create clothing that keeps athletes warm in the winter, cool during the summer and every temperature in between. Under Armour offers a wide range of styles, including compression clothing, fitted and loose fits. The company also develops its own footwear products like cleats, running shoes, basketball footwear, and hunting boots.
Their products are designed with special fabrics that keep you warm when it is cold, and cool when its warm. UA sells its products through wholesale channels, sporting goods chains, specialty retailers, department store chains, institutional athletic departments, as well as independent distributors. They also sell their products directly to consumers through a network of brand and factory house stores, and a website.
Direct to consumer has been a real focus of the company. Since 2005 the direct sales part of the business has gone from 6% of the business to 30% so far this year, and UA expects the number of direct sale locations to more than double by 2016, with the total score count growing to 141 locations, up from 54 stores in 2010.
They are also pushing into international markets and just announced the opening of Brazilian markets for their products, and have also pushed into Europe, Japan and China as part of their international sales effort.
The stock price dipped a little back during the Winter Olympics when it was thought that perhaps the new speed skating suits were hurting the athlete’s performance. This was quickly debunked when the team switched back to the old suits and still didn’t do very well on the ice!
Right after the close of the Sochi games it was announced that UA and U.S. Speed Skating agreed to an eight-year extension of their initial partnership, which had been set to expire this year. The partnership now runs through 2022.
The company has posted 4 consecutive positive quarterly earnings surprises, and analysts have been raising their expectations for sales and profits for 2014 as well as 2015. This is the type of performance that identifies a best of the best company, and Portfolio Grader raised the stock to an “A” back in January.
Shares of Under Armour are a strong buy at the current price.
