The earnings season is in full swing which means the stock market will continue to remain volatile in the near term as quarterly results of companies will impact their stock prices.
Here, we take a look at two retail players, Under Armour (UAA) and Ralph Lauren (RL), that have surprised Wall Street as they reported better than expected earnings in the last quarter. The retail sector has been under the pump in the last 16 months as several countries imposed economic restrictions that severely impacted top-line growth.
However, as the vaccination rollout has gained pace and restrictions are relaxed, stocks part of the retail sector are poised for a comeback. Let’s see if Under Armour and Ralph Lauren can continue to deliver outsized gains and end 2021 on a high.
Under Armour (UAA)
In the second quarter of 2021, Under Armour sales stood at $1.35 billion and adjusted earnings per share of $0.24. Comparatively, Wall Street expected the company to post revenue of $1.21 billion and earnings of $0.05 per share in Q2.
The company raised earnings guidance to between $0.50 and $0.52 in 2021, up from its previous guidance of between $0.28 and $0.30. Its revenue forecast was also raised to $5.33 billion in 2021. While revenue was in line with estimates, analysts forecast EPS of $0.34 in 2021. The company’s updated guidance reflects year-over-year revenue growth of 19%.
Under Armour also expects operating income between $215 million and $225 million this year as its gross margin is estimated to improve by 130 and 150 basis points in Q3.
Due to the impressive earnings, Under Armour stock is up 6.4% in early market trading today and has gained over 30% year to date. In 2020, Under Armour saw its revenue decline by 15% and also reported a net loss of $549 million.
Now, analysts expect the stock to increase earnings at an annual rate of 20% in the next five years. Wall Street also has a consensus price target estimate of $25.5 for Under Armour stock which is 10% above its current trading price.
Ralph Lauren (RL)
Shares of luxury retail giant Ralph Lauren are up close to 8% on the back of its earnings beat. Its sales in fiscal Q1 of 2022 stood at $1.38 billion with an adjusted EPS of $2.29. Analysts tracking the stock forecast sales to touch $1.21 billion and earnings of $0.86 in Q2.
In the fiscal second quarter of 2022, sales are forecast to grow between 20% and 22% while the operating margin is estimated between 13% and 14%. In fiscal 2022, Ralph Lauren expects sales to increase between 25% and 30% year over year. Wall Street expects revenue to rise by 26.6% to $5.57 billion in fiscal 2022.
Ralph Lauren stock has gained 25% in market value year to date and is up 82% in the last 12-months. Prior to its quarterly results analysts had a 12-month price target of $136 for RL stock. These forecasts will be revised upwards given the company’s stellar performance in the June quarter.
UAA shares were trading at $23.41 per share on Wednesday morning, up $0.71 (+3.13%). Year-to-date, UAA has gained 36.34%, versus a 18.53% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditya Raghunath
Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist. More…
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