We asked a perfectly reasonable question last month: Why was Fairfax Financial, under Prem Watsa (often called the "Canadian Warren Buffett"), adding significant long exposure in Under Armour equity?

Weeks later, we might know why...

Under Armour reported third-quarter results that surprised Wall Street analysts tracked by Bloomberg, posting a profit and topping revenue estimates.  

Third Quarter Results (courtsey of Bloomberg):

Adjusted EPS 9.0c vs. 8.0c y/y, estimate loss/shr 1.1c

Loss per share $1.01, estimate loss/shr 9c

Net revenue $1.33 billion, -5.2% y/y, estimate $1.31 billion

• Apparel revenue $934.0 million, -3.3% y/y, estimate $924 million

• Licensing revenue $27.2 million, +14% y/y, estimate $23.2 million

• Footwear revenue $265.1 million, -12% y/y, estimate $259.4 million

• North America revenue $756.7 million, -10% y/y, estimate $750.7 million

• Asia Pacific revenue $190.9 million, -5.1% y/y, estimate $183.6 million

• EMEA revenue $315.8 million, +6% y/y, estimate $321 million

• Latin America revenue $70.6 million, +20% y/y, estimate $60.3 million

Adjusted operating income $26.4 million, -56% y/y, estimate $5.76 million

Inventory $1.07 billion, -2.4% y/y, estimate $1.18 billion

Total location count 450, +0.4% y/y, estimate 450.33

Operating loss $149.8 million vs. profit $13.5 million y/y, estimated loss $46.7 million

Management also raised its outlook, reinforcing a view we've covered via UBS: an early-stage turnaround may be taking hold after years of the stock being beaten down.

Full Year Forecast (courtsey of Bloomberg)

• Sees adjusted EPS 10c to 11c, saw 3.0c to 5.0c, estimate 4.9c (Bloomberg Consensus)

• Sees loss per share $1.24 to $1.25, saw loss/shr 15c to loss/shr 17c

• Sees revenue -4%, saw -4% to -5%

• Sees gross margin about -190 bps

• Sees adjusted operating income $110 million, saw $95 million to $110 million, estimate $97.8 million

• Sees operating loss $154 million, saw loss $56 million to loss $71 million

UA President and CEO Kevin Plank commented on the earnings:

Our third-quarter adjusted operating results exceeded expectations, and despite a few unfortunate, non-recurring impacts, we're encouraged by the progress we're making in the business to reignite brand momentum.

In North America, we believe the December quarter marked the most challenging phase we'ver business reset, and we expect greater stability ahead as we build on this progress globally.

Our transformation is accelerating as we sharpen our focus and strengthen execution. Our strategy is gaining traction through better products, bolder storytelling, and a more disciplined market presence, positioning Under Armour to operate with greater intention and confidence going forward.

After years of reporting UA's brand losing market share. We began to change our view on UA after UBS analyst Jay Sole, in September, forecasted a major inflection point for the Baltimore-based apparel company.

At the time, Sole argued that sentiment would turn positive in FY27, setting the stage for stock outperformance.

Then last month, what really piqued our interest was Fairfax Financial Holdings taking a monster 22% stake in UA.

We even asked the question:

... and now we know why.

Shares moved up 3.5% in premarket trading after the earnings report. On the year, shares are up 26%, after being beaten down to 2010 levels since peaking in 2015.

We also note that Bloomberg data show UA's float is 33% short. A possible squeeze candidate for sure.