Quiksilver shares jump after upgrade

NEW YORK (Reuters) - Shares of sports apparel maker Quiksilver Inc. (ZQK.N: Quote, Profile, Research, Stock Buzz) soared 7 percent on Tuesday, a day after Morgan Stanley upgraded its stock on the strength of its core business.

"Morgan Stanley put out a positive note on the company and I suspect that's what's moving the stock this morning," said analyst Jeff Mintz, who follows Quiksilver for Wedbush Morgan Securities.

Morgan Stanley's Brian McGough upgraded Quiksilver's stock to "overweight" from "equal-weight."

"We think the market is under-appreciating Quiksilver's underlying earnings power, the strategic options open to the company, and the private market value ... ," McGough wrote in a note to clients.

Last month, the Huntington Beach, California-based owner of Quiksilver, Roxy and DC Shoes brands reported a nearly 87 percent drop in quarterly profit and slashed its fiscal 2007 earnings outlook as a warm winter hurt its ski business.

Chief Executive Robert McKnight said at the time that the company was experiencing poor re-orders, heavy markdowns and fewer orders for the next season.

Although uncooperative weather and the continuing impact of Quiksilver's 2005 merger with French apparel maker Rossignol exacerbated the earnings miss, Quiksilver was "badly bruised, but not broken," McGough wrote.

Quiksilver's growth prospects remain compelling, he added. "Even if Quiksilver gave Rossignol away and yet kept the associated debt on the balance sheet, we can get to earnings per share 10 percent above the 2008 consensus estimate of $0.82."

Shares of Quiksilver were up 7 percent, or 82 cents, at $12.31 in morning trade on the New York Stock Exchange.