Why Tailored Brands Stock Just Popped 16%

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What happened

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Shares of Tailored Brands (NYSE: TLRD) -- the company formerly known by brands such as Men's Wearhouse and Jos. A. Bank -- are rocketing Thursday morning, with the stock price up 16% as of 11:10 a.m. EST. The reason, as you may have guessed, is earnings.

Last night, Tailored Brands reported its financial results for fiscal Q3 2017. Per-share profits of $0.75 per share far surpassed the $0.54 per share that Wall Street was expecting.

So what

Tailored Brands grew its earnings 29% year over year. This was despite quarterly sales coming in at only $810.8 million, down 4% in comparison to last year's Q3.

Fortunately for Tailored Brands, its cost of goods sold also declined 4% year over year. More importantly, Tailored Brands succeeded in cutting advertising expenditures by 15%, and cutting selling, general, and administrative expenses by 10%. This resulted in a big improvement in operating profit margins -- 230 basis points' worth of improvement, for an operating margin of 9.5%.

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Now what

With less than one quarter to go before its fiscal year draws to a close, Tailored Brands also updated its earnings guidance for fiscal 2017. For the year, it expects to earn between $1.80 and $1.85 per diluted share, giving the stock about an 11 current-year P/E ratio, which hardly seems expensive.

Moreover, pro forma profits for the year are expected to range between $2.03 and $2.08 per share, significantly higher than analyst expectations of $1.84 per share. While I suspect this is the real reason Tailored Brands stock is spiking today -- the prospect of an earnings beat -- it's the stock's low share price and cheap valuation that should really be interesting to long-term investors.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.