Nautilus Inc. shares soared Tuesday after the fitness equipment maker's first-quarter profit came in ahead of market expectations and B. Riley & Co. analysts upgraded the stock.
THE SPARK: The company reported Monday that its net income increased to $5.2 million, or 17 cents per share, from $2.5 million, or 8 cents per share. That included a penny in both quarter from discontinued operations. Revenue increased nearly 16 percent to $59.2 million.
Analysts polled by FactSet expected earnings of 12 cents per share on revenue of $54.9 million.
THE BIG PICTURE: Nautilus, based in Vancouver, Wash., makes fitness products like Bowflex and its namesake gym equipment. The company has been trying for years to improve business and its stock price soared in March after it reported a strong fourth quarter.
The company said its first quarter was helped by strong demand and improved margins. Sales directly to customers grew, but its retail business suffered because of weak sales of fitness equipment sold in stores.
THE ANALYSIS: Chris Armbruster and Ian Corydon of B. Riley said that effective advertising and rising consumer credit approval rates helped Nautilus capitalize on improving demand for its products. While its retail segment revenue was down 9 percent, they noted that gross margin improved on prices.
Armbruster and Corydon said that they underestimated the new advertising initiatives and ability to sustain gains in direct sales. They upgraded Nautilus to "Buy" from "Neutral" and increased their price target to $9 from $7.55.
SHARE ACTION: Shares soared by $1.23, or 18.2 percent, to $7.99 in afternoon trading. The stock's value has grown more than three-fold from a year ago.