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When a Company Tops Earnings, That Doesn't Mean You Should Buy

Real Money's Bruce Kamich made the right call on a big Oregon-based sportswear maker a month ago.

An Oregon sportswear company recently topped earnings estimates by a wide margin, but picking up the shares for anything other than a short-term trade was the wrong play. 

Tim Boyle, chairman, president and CEO of Columbia Sportswear  (COLM) , told Jim Cramer on a recent episode of the Mad Money TV show that despite supply chain disruptions around the globe, the company was still able to deliver big earnings in the fourth quarter. 

In fact, Columbia Sportswear topped estimates by 60  cents a share.

When asked about those recent earnings, Boyle said that consumers were aware of supply chain problems and bought early.  That led  to fewer promotions and higher gross margins. Columbia also slowed their online sales to help support retailers and ensure they had all of the inventory they needed this winter.

Columbia was sporting a price to earnings ratio of around 17 at the time of the report. 

But Real Money's technical analyst Bruce Kamich was cautious. "The charts and indicators of COLM do not yet show a clear path higher for prices, Kamich wrote on Real Money at the time. "We could see COLM bounce further to the upside in the short run, but the clues point to further declines in the weeks ahead. Avoid the long side of the stock but consider purchasing the products."

Sure enough shares of Columbia did move higher in the wake of the report, only to reverse course by mid-February. The stock is now trading well below $90.05, where it stood on Feb.3, the date of the earnings report.

Columbia still has a stable of popular consumer brands, Boyle told Cramer, and thanks to innovations and new technology, those brands are being improved and selling better across the globe, he said.

Boyle has been involved in the long-time family firm since the 1970s, helping lead many innovations in the outdoor apparel business. The company's Bugaboo parka, first released in 1986, revolutionized  the way alpine skiers dress.  Boyle took over from his mother, Gert, as company president in 1988.

Gert’s parents had fled from 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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