Why Columbia Sportswear Stock Rose 19% in February

What happened

Shares of clothing maker Columbia Sportswear (NASDAQ:COLM) jumped 19% in February according to data from S&P Global Market Intelligence. There was a notable price increase early in the month, with the gains holding through to the end. It was all about earnings, sort of.

So what

Columbia Sportswear’s fourth-quarter 2020 sales decreased 4% year over year, which isn’t too bad given the coronavirus pandemic backdrop. Online sales increased a hefty 41%, though that was clearly offset by declines in brick-and-mortar stores, as you would expect. The earnings picture wasn’t nearly as sanguine, however, with a 14% year-over-year drop in the quarter. Still, the quarter was pretty solid given the environment at hand.  

Three women shopping for coats.

Image source: Getty Images.

That might have gotten investors into a buying mood, but it was more likely the outlook here that really did it. For starters, investors were primed for this update, given that Columbia Sportswear announced it was reinstating its dividend at the pre-COVID level of $0.26 per share in late January. And the company didn’t disappoint when earnings were reported, with management looking for a sales increase of 18% to 20% year over year in 2021. On the bottom line, it is projecting earnings of $3.75 per share to $4.05, up from the full-year 2020 tally of just $1.63. Although the 2021 projection is below the 2019 level, it would be a huge improvement from 2020 and suggests that this sportswear company’s business is getting back to normal.  

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Now what

Columbia Sportswear is clearly telegraphing material business improvement in the quarters ahead. That would, indeed, be nice to see, but long-term investors should still monitor the name closely to make sure it can live up to those projections. The stock price is back to where it was prior to the start of the pandemic, so investors are pricing in a recovery that really hasn’t shown up in the numbers just yet.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

View more information: https://www.fool.com/investing/2021/03/03/why-columbia-sportswear-stock-rose-19-in-february/

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