Under Armour Inc (NYSE: UA, UAA) stock crashed 13 percent to its lowest level in more than four years on Tuesday after the company aggressively cut its full-year earnings and revenue guidance. Under Armour has been dealing with slowing growth for roughly two years now, and the company’s third-quarter earnings report provided no indication of a near-term turnaround.
Under Armour reported third-quarter earnings per share of 22 cents, beating consensus analyst estimates of 18 cents per share. However, third-quarter revenue of $1.4 billion came up short of consensus expectations of $1.5 billion and represented a 4.5 percent year-over-year decline.
[See: How to Invest in Esports: 7 Winning Stocks.]
As recently as one year ago, Under Armour was consistently reporting revenue growth above 20 percent. That growth declined to single digits in 2017 and dropped into negative territory for the first time in the third quarter.
Under Armour also cut its full-year revenue growth guidance from a range of 9 to 11 percent to “a low single-digit percentage.” The company also dropped its full-year EPS guidance from a previous range of 37 to 40 cents to a new range of 18 to 20 cents.
Under Armour retailers, including Dick’s Sporting Goods ( DKS), Foot Locker ( FL) and Hibbett Sports ( HIBB), have all been struggling in an increasingly difficult retail environment. Pricing cuts on Under Armour inventory have weighed on margins and profitability.
[See: The 9 Best ETFs for Retail Power.]
Bank of America Merrill Lynch analyst Robert Ohmes predicted the guidance cut was coming in a downgrade note on Monday.
“We expect that given the highly promotional landscape, UA will need to lower its 4Q ’17 guidance on its 3Q ’17 conference call,” Ohmes wrote. “Facing incremental headwinds including the challenging environment in North America, we believe UA revenue will remain under pressure through 2017 and into 2018.”
FBR Capital Markets analyst Susan Anderson says Under Armour likely isn’t finished with its cuts.
“We haven’t heard what they’re expecting yet for next year, but I do think numbers probably have to come down again for next year because I just don’t see the environment changing anytime soon,” Anderson said on CNBC. “All they can do at this point is talk about what they can do in the future, but I think we’re looking out probably over the next two years before we really see any traction.”
[See: 7 Stock Turnaround Champions.]
Bank of America has an “underperform” rating and $12 price target for Under Armour stock.
More from U.S. News
7 Investment Fees You Might Not Realize You’re Paying
9 Psychological Biases That Hurt Investors
8 Boring Stocks With Soaring Potential
Under Armour (UA, UAA) Cuts Earnings Guidance by 50 Percent originally appeared on usnews.com
