Shares of True Religion Apparel Inc. soared Thursday after the clothing company beat market expectations for its fourth quarter, and it issued a strong earnings outlook.
THE SPARK: The company, known for its higher-end denim, said Wednesday that net income slipped to $13.5 million, or 53 cents per share, for the quarter that ended Dec. 31. That compares with $14.5 million, or 57 cents per share, a year ago. The company made 55 cents per share in the most recent quarter on an adjusted basis.
Sales increased nearly 15 percent to $137 million.
Analysts polled by FactSet expected 53 cents per share on revenue of $129.1 million.
THE BIG PICTURE: True Religion announced in October that it was reviewing its strategic alternatives. The company said the review is still under way.
Meanwhile the company forecast first-quarter earnings of 33 to 35 cents per share on revenue of $113 million to $114 million. Analysts forecast 39 cents per share on sales of $112.9 million.
True Religion also expects $1.89 to $1.95 per share for the full fiscal year on revenue of $509 million to $513 million. Analysts estimate $1.87 per share on revenue of $494.5 million.
THE ANALYSIS: Brean Capital LLC analysts Eric Beader and Danielle McCoy said True Religion's fourth-quarter should begin to convert non-believers.
The analysts said that after almost constant disappointments, True Religion came through with a solid fourth quarter, beating the market's weak projections. That was driven by better performance in domestic stores and improvement in its international segment. They said the women's business is slowly improving and management is getting a better feel for managing the international business.
"After two years of frustrating inertia, (this) represents a key step forward in reigniting investor interest in the name," Beader and McCoy said in a research note.
The analysts also said they continue to believe there is the potential the company will be bought before long. They raised their earnings estimates, reiterated a "Buy" rating and maintained a $32 target price.
SHARE ACTION: Shares jumped $5.25, or 22.1 percent, to close at $29. It's the highest closing price in nearly seven months.