By Emily Bary
Earnings Watch: An Altria buyback announcement failed to overshadow weakness in cigarettes
Under Armour Inc. shares tumbled more than 15% Tuesday after the company reported quarterly results that highlighted its sales struggles in North America.
The athletic-apparel retail was under pressure to justify its recent share-price rally heading into its latest report, but management's weak expectations for the North America business didn't inspire confidence. Under Armour (UAA) (UAA) executives told investors they now expect North America sales to show a slight decline this year (), whereas it had previously been forecasting "relatively flat results."
Chief Financial Officer David Bergman said the outlook reflects the company's efforts to lessen its reliance on off-price channels, which have hurt profits in the past.
The disappointing forecast, coupled with a poor showing for North America in the second quarter, helped to send shares tumbling toward their worst single-day drop since late 2017. Under Armour's challenges in a key region also overshadowed signs of progress elsewhere, including on inventory and margins.
The key question for Bernstein analyst Jamie Merriman is whether improvements to profitability will be enough to support Under Armour's stock while the company only manages to grow overall sales by a low single-digit rate. With shares trading at a premium relative to apparel peers, she's doubtful investors will be too forgiving.
--Altria Group Inc. (MO) surprised investors with its announcement of a $1 billion buyback, but that wasn't enough to mask persistent problems () in the cigarette maker's core business. The company saw cigarette shipment volumes fall 7% after accounting for factors like trade inventory movements. As e-cigarettes gain more momentum, Altria's management is taking a bleaker view of cigarette trends for the full year. The company now projects that domestic cigarette industry volumes will fall 5% to 6% for the full year ( ), whereas it had previously modeled a 4% to 5% drop.
Coming up this afternoon
Apple Inc. (AAPL) will be looking to move past its emerging-market issues in a quarter where it faces "low expectations." ( )
That's the view of several analysts, who say investors aren't particularly bullish in thinking about Apple's ability to drive smartphone upgrades as the company deals with geopolitical headwinds and the lack of a meaningful catalyst in the fall. The June quarter is typically a sleepy one for Apple, since Apple's current crop of new iPhones has been out for months while its next batch looms on the horizon, but the key figure in Apple's afternoon release will be its outlook. That number won't only reflect management's expectations around a China rebound, but it should also contain glimpses of how Apple predicts its next wave of phones will perform, since the September quarter typically contains a few weeks of sales of the newest models.
Apple earnings: It looks like 2016 again, and that is not a good thing ()
New products will be a key theme for Advanced Micro Devices Inc. (AMD) as well, following a sustained rally for the stock on expectations that the company will be able to win market share with its increasingly competitive offerings.
Don't miss: Apple, AMD stock option traders aren't expecting fireworks after earnings reports ()
While hopes aren't particularly high for Apple, AMD faces "difficult, super-seasonal expectations" for the second, third, and fourth quarters, according to Susquehanna's Christopher Rolland. That's because the company gave an especially rosy forecast at the start of the year. AMD's third-quarter outlook will be a major focus in the coming report as it should indicate management's projections for AMD's new 7-nanometer offerings, which launched in early July and should ramp up as the second half of the year progresses.
AMD earnings: With stock at highest prices in more than a decade, outlook must be strong ()
Also on deck are reports from Electronic Arts Inc. (EA), FireEye Inc. (FEYE), Gilead Sciences Inc. (GILD), and Groupon Inc. (GRPN)
-Emily Bary; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
July 30, 2019 10:35 ET (14:35 GMT)
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