What happened

Shares of Yeti Holdings (YETI 0.92%) were up 27% as of 11:03 a.m. ET on Thursday after a strong third-quarter earnings report. Revenue and earnings per share beat analysts' estimates, sending the stock higher.

Concerns about consumer spending have weighed heavily on Yeti's stock in 2022. Year to date, shares have fallen 54%, but the company continues to report solid growth on the top line, and investors finally saw market validation for that performance today. 

So what

Net sales were up 20% year over year, which is a slight acceleration over the previous two quarters. This growth was driven by healthy demand across drinkware and coolers.

The company also continues to generate around half of its sales through the direct-to-consumer channel, but the company still reported a decline of 14% year over year in net profit due to cost inflation. 

Yeti is seeing excellent performance from its international operation, which is still in the early innings of long-term growth.

Now what

Management cautioned that there remains a lot of uncertainy heading into the holiday quarter. Despite beating expectations last quarter, management didn't raise guidance for the fourth quarter. It still expects sales growth of 16% for the full year. Operating profit margin is also expected to be approximately 17%, down about 6 points from last year due to higher supply chain costs.

Long term, Yeti has opportunities to reach new customers and sell more products to existing customers. Management believes that further use of social media can educate consumers about the versatility of its products in a variety of activities.

If the company can continue to deliver double-digit earnings growth over the next five years, consistent with its history, the stock looks tempting trading at a modest price-to-earnings ratio of 16.6, which is below the market average.