Are UA's earnings surprises a sign of strength?

Under Armour's (UA) earnings surprises, while positive in terms of exceeding expectations, do not necessarily indicate a strong financial performance or a sustainable turnaround.

1. **Revenue Decline**: UA's revenue decreased by 6% to $1.4 billion, which is a drop in the wrong direction considering the market expected a nearly 10% decline. This decline is a sign of weakening sales and market share, especially when compared to the past high-growth years.

|code|Ticker|Name|Date|Total Revenue YoY|Diluted EPS YoY|Total Revenue|Diluted EPS|market_code|
|---|---|---|---|---|---|---|---|---|
|UA|UA.N|Under Armour C|2024 Q4|-4.748159773488584|-94.73684210526315|1.332197E9|0.02|169|
|UA|UA.N|Under Armour C|2025 Q1|-10.121757222097779|-3600|1.183665E9|-0.7|169|
|UA|UA.N|Under Armour C|2025 Q2|-10.701077569424143|69.56521739130434|1.399023E9|0.39|169|
|UA|UA.N|Under Armour C|2025 Q3|-5.720157492077955|-100|1.401039E9|0|169|

2. **Market Segment Performance**: The company's performance varies across different market segments. While EMEA revenue was up 5% (3% currency neutral), Asia-Pacific revenue was down 5% (6% currency neutral), and Latin America revenue was down 16% (9% currency neutral). This mixed performance suggests that UA is facing regional challenges and has not yet established a strong foothold in all markets.
3. **Profitability Concerns**: The decline in revenue is not the only concern. UA's direct-to-consumer revenue was down 9%, and e-commerce revenue dropped 20% due to planned reductions in promotional activities. This could indicate a lack of customer loyalty and dependence on discounting to drive sales, which is not a healthy sign for long-term profitability.
4. **Earnings Estimate Revisions**: The consensus EPS estimate for the quarter has been revised 4.29% lower over the last 30 days. This reflects a more pessimistic outlook from analysts, which could be a sign that the earnings surprises may not be indicative of a strong fundamental turnaround.
5. **Gross Margin**: Although UA's gross margin exceeded forecasts, the company's ability to sustain profitability and improve margins in the face of declining revenues is crucial. Without a clear strategy to reverse the revenue decline and improve operational efficiency, the positive gross margin may not be enough to support sustained earnings growth.

In conclusion, while UA's earnings surprises may be viewed as a sign of strength by some, the overall context of declining revenues, regional performance disparities, and profitability concerns suggest that these surprises may not be a definitive indicator of a strong financial position or a sustainable turnaround. The company's long-term success will depend on its ability to address these underlying issues and improve its core business metrics.