Under Armour, Inc. (UAA) shares rose more than 25% on Tuesday morning after the company reported positive third quarter financial results. Revenue rose 2.1% to $1.44 billion, beating consensus estimates by $20 million, and non-GAAP net income of $0.25 per share beat consensus estimates by 13 cents per share.
Apparel revenue was especially strong and helped offset weakness in footwear. Gross margins improved 20 basis points to 46.5% of sales, while operating margins came in at 8.2%, which was above the 5.6% consensus. Management indicated that these results were due to ongoing turnaround efforts designed to improve revenue and profitability. Analysts were also largely upbeat on the financial results. Piper Jaffray indicated that Under Armour's guidance was cautious and could set up a holiday quarter beat, while Stifel suggested that there could be light at the end the tunnel in 2019.
From a technical standpoint, Under Armour stock broke out from its descending price channel and R1 resistance toward R2 resistance and prior highs. The relative strength index (RSI) moved into overbought territory with a reading of 10.17, but the moving average convergence divergence (MACD) experienced a bullish crossover that could signal more upside ahead.
Traders should watch for some near-term consolidation above R1 resistance at $22.40 before a possible breakout from R2 resistance at $23.59 to retest prior highs of around $25.00. If the stock breaks down below trendline support at around $21.50, traders could see a move lower to the pivot point at $20.43, but that scenario appears less likely given the strong third quarter.
Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.