Under Armour (NYSE: UA) reported earnings for its third quarter this week, causing the stock price to go up as much as 12% Tuesday. The company exceeded $1 billion in revenue for the first time last year, and it already topped last year's revenue through the first three quarters this year.

Net revenues increased 42% to $466 million over the same period last year, resulting in an increase of earnings per share to $0.88, up from $0.68 this time last year. This also exceeded the expectations of most analysts, who were expecting only $0.82 per share.

What's ahead
The company raised revenue and income guidance based on these results, anticipating a 38% increase in revenue and 44% increase in net income. It further expects to open another four factory stores during the fourth quarter, bringing the total by the end of the year to 80. It will also continue to expand its "store-within-a-store" concept at retailers like Dick's Sporting Goods (NYSE: DKS).

The company prides itself on telling stories with its products and tends to build marketing campaigns around those stories. CEO Kevin Plank announced that there will be a new campaign beginning in November around its basketball-shoe line, and the NBA lockout should not directly affect sales. Much like its presence in college football, Under Armour provides apparel and footwear to 16 Division 1 basketball programs across the country, keeping the product line in front of the consumer.

What I was watching
As with previous quarters, investors are paying attention to Under Armour's inventory levels. The third quarter this year was no exception, with year-over-year inventory growth up 63%. This is down from the previous quarter's number of 74%, though it moves the company closer to its stated goal of having its inventory growth rate in line with revenue growth. Inventory growth this year was primarily due to higher commodity costs, as well as the moving the production of hats and bags in-house. If the company can meet its stated goal of closing this gap, maybe people will stop giving them so much grief.

What do you think?
Under Armour is the first clothing retailer to report this quarter, so we have to wait to see how it will compare with its competitors. But there's a reason that at least two Motley Fool newsletter teams have recommended this stock. I've had Under Armour rated a "thumbs up" in Motley Fool CAPS since July, and it hasn't disappointed. Thousands of investors are already rating Under Armour and hundreds of other stocks on CAPS. Join the discussion today.

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