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Obagi Medical stock rises following 4Q results

NEW YORK (AP) -- Shares of Obagi Medical Products Inc. rose Friday after the company reported solid fourth-quarter results.

THE SPARK: Obagi said Thursday that its net income grew to $7.3 million, or 41 cents per share, over the last three months of the year from $5.1 million, or 27 cents per share, a year ago. Excluding a one-time gain from an insurance settlement the company said it earned 15 cents per share. Sales slipped to $30.3 million from $30.6 million.

Analysts expected net income of 20 cents per share and $30 million in revenue, according to FactSet.

The Long Beach, Calif., company said it has been reducing sales to unauthorized discount sites on the Internet. It also said sales of its Nu-Derm prescription skin care system improved, and it launched a new moisturizer during the quarter.

THE BIG PICTURE: Obagi's effort to reduce discounted online sales of its products has led to higher costs and affected its sales, but the company says it will ultimately be able to make those sales through its own website, which would bring higher prices and better margins.

Net income climbed to $16.6 million, or 90 cents per share in 2012, from $10 million, or 54 cents per share, in 2011. Revenue rose 6 percent, to $120.7 million.

Obagi is projecting net income of 80 to 84 cents per share and $126 million to $130 million in revenue in 2013. That includes income of 9 or 10 cents per share on $30 million to $30.5 million in revenue in the first quarter.

In December Voce Capital LLC said it planned to nominate an alternative slate of directors to replace Obagi's board. In a letter sent to Obagi's management, Voce said incentives for the board were "misaligned with, and in many ways adverse to, those of shareholders."

The firm said it owned 52,000 shares as of November, or about 0.3 percent of Obagi's stock

THE ANALYSIS: Cantor Fitzgerald analyst Irina Rivkind upgraded Obagi to "Buy" from "Hold," saying she thinks Obagi would be an attractive acquisition target. She said the company plans to launch several new products each year and plans to expand its Asian business in 2013, and she thinks its results will get stronger in the second half of the year. She said the web initiatives will take time, however.

Rivkind raised her price target to $19 per share from $15.

SHARE ACTION: Obagi rose 97 cents, or 7 percent, to close at $14.91. The stock fell 18.6 percent on Aug. 3 after the company reported its second-quarter results, but has climbed 14.2 percent since then.