The stock of Spokane-based Ambassadors Group Inc. has been upgraded to a buy by D.A. Davidson & Co., the Great Falls, Mont.-based regional stock brokerage, based on Ambassadors strong recent earnings report.


Last week, the Spokane educational travel company reported second-quarter net income of $13.1 million, or $1.26 a diluted share, up about 45 percent from year-earlier earnings of $9 million, or 90 cents a share.


In a research note issued the next day, D.A. Davidson said Ambassadors had beaten the brokerages second-quarter per-share earnings estimate of $1.12, and credited the better-than-expected financials to strong traveler counts.


Ambassadors says it handled 16,000 travelers, whom it calls delegates, during the first six months of this year, compared with 12,000 in the year-earlier period.


The companys gross program receipts in the second quarter shot up 36 percent, to $72.8 million, while its net revenue climbed 42 percent. Ambassadors gross margin improved slightly during the quarter, though its expenses grew, due to higher marketing costs and the need for more personnel to support the increased travelers.


We are more than pleased with our financial results in 2004 so far, Jeff Thomas, Ambassadors president and CEO, said in the earnings statement. Due to our seasonality, the changes and improvements that we have been making to our operations, brand strength, and financial management have not been fully visible outside our organization.


In its buy recommendation, D.A. Davidson also pointed out Ambassadors debt-free balance sheet that includes $40 million of deployable cash.


The brokerage is raising its 2004 earnings forecast for Ambassadors to $1.50 a share, from its earlier projection of $1.35 a share, and its 2005 earnings forecast to $1.70 a share, from $1.55. It also raised its 12- to 18-month target for Ambassadors stock to $28, from $24 previously. As of last week, Ambassadors common shares were trading at about $26 a share.


D.A. Davidsons previous recommendation on Ambassadors stock was neutral.


Ambassadors Group organizes international and domestic travel programs for students, athletes, and professionals, including the People to People program. It employs nearly 170 people.