Carter's shares climb on upgrade

Shares of Carter's Inc. rose on Thursday after an analyst upgraded the stock from "sell" to "neutral" saying improvement at OshKosh will help carry the company through the first half of the year.

Shares rose 34 cents, or 2.1 percent, to close at $16.28 Thursday.

On Tuesday the Atlanta-based retailer, which operates its namesake stores and OshKosh, posted better-than-expected fourth-quarter sales.

Goldman Sachs analyst Benjamin H. Rowbotham wrote in a note to clients that the fourth-quarter results marked two straight quarters of improvement at OshKosh in both retail and wholesale, "increasing our confidence in the trajectory of management's turnaround efforts." He said OshKosh's momentum will help carry the company through the first half of fiscal 2009, when margin comparisons will ease at Carter. He said valuation of the stock and risk/reward are more balanced.

"We anticipate that shares will mark time until earnings growth resumes, something we believe remains several quarters away and thus reinforces a Neutral rating," he wrote.

The company said Tuesday revenue grew 7 percent to $422 million in the three months ended Jan. 3., from $393.4 million in the year-ago period. That beat analysts' estimate of $413.3 million in sales, according to Thomson.

But fourth-quarter profit declined 4 percent, despite positive same-store sales, as the children's-clothes maker's expenses increased.

Rowbotham lowered his 2009 earnings per share estimate to $1.28 from $1.37, due to incremental margin pressure in certain divisions. That estimate means he expects a 5 percent drop in year-over-year growth. Analysts are predicting, on average, the company earns $1.34 a share in fiscal 2009.

Rowbotham also lowered his 12-month price target by $1 to $15.