When a Company Exceeds Earnings, That Doesn’t Mean You Should Buy


An Oregon sportswear company recently far exceeded its earnings estimates, but picking up the shares for anything other than a short-term trade was a bad move.

Tim Boyle, Chairman, President and CEO of Columbia Sportswear (COLM) – Get Columbia Sportswear Company Reporttold Jim Cramer on a recent episode of the Mad Money TV show that despite supply chain disruptions around the world, the company was still able to generate strong fourth quarter profits.

In fact, Columbia Sportswear beat estimates by 60 cents per share.

Asked about this recent revenue, Boyle said consumers are aware of supply chain issues and are buying early. This led to fewer promotions and higher gross margins. Columbia has also slowed its online sales to help retailers and ensure they have all the inventory they need this winter.

Columbia had a price-earnings ratio of around 17 at the time of the report.

But Real Money technical analyst Bruce Kamich was cautious. “COLM charts and indicators do not yet show a clear path to the top for price, Kamich wrote on Real Money at the time. further declines in the coming weeks. Avoid the long side of the stock but consider buying the products.”

Of course, Columbia shares rose following the report, only to reverse the trend in mid-February. The stock is now trading well below $90.05, where it stood on Feb. 3, the earnings report date.

Columbia still has a stable of popular consumer brands, Boyle told Cramer, and thanks to innovations and new technologies, those brands are improving and selling better across the world, he said.

Boyle has been involved in the long-running family business since the 1970s, helping to spearhead many innovations in the outdoor apparel industry. The company’s Bugaboo Parka, first released in 1986, revolutionized the way alpine skiers dressed. Boyle succeeded his mother, Gert, as company president in 1988.

Gert’s parents had fled Europe and the Nazis and settled in Portland in 1937 where they purchased a small hat manufacturer, naming it the Columbia Hat Company.

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