Shares of Levi Strauss (NYSE: LEVI) are up 4% in pre-open Thursday after the denim company reported better-than-expected Q3 earnings.

The company reported EPS of $0.48, beating the consensus estimate of $0.37. Sales for the quarter came in at $1.5 billion, higher than the consensus estimate of $1.46 billion.

“We delivered a strong quarter with revenue growth versus pre-pandemic 2019 levels, despite a more difficult macro-environment than we expected,” said Chip Bergh, president and chief executive officer of Levi Strauss & Co. “These results reflect the strength of the Levi's® brand, improving momentum in our direct-to-consumer business and the scale and agility of our supply chain network where we have executed against macro-headwinds exceptionally well. Our future is bright given our iconic Levi's® brand and the acquisition of Beyond Yoga, which establishes our position in the fast growing, high-margin premium activewear market as we continue to capitalize on global casualization trends.”

On the outlook front, LEVI is calling for the EPS coming in the range of $0.38 to $0.40, with the midpoint in line with the Street consensus. Levi’s also called for the net revenue growth of 20-21% year-over-year.

Wells Fargo analyst Ike Boruchow reiterated an Overweight rating and a $31.00 per share price target after a “very optimistic 4Q outlook.” Crucially, Boruchow believes the management has managed to ease off concerns related to the cost pressures, hence he urged investors to buy the dip.

“Most notably from today's print, LEVI is navigating supply chain & cost inflation challenges prudently—mitigating the negative impacts through pricing and diverse supply chain. While LEVI may be the exception, the table could be set for many companies to provide "less worse" commentary around supply chain/inflation than investors anticipate when earnings season kicks into full gear later this month,” Boruchow wrote in a client note.

“With low exposure to Vietnam (4%) and China (1%) sourcing, pricing power to combat cotton inflation (AURs +double-digits in 3Q) and a "denim cycle" fueling top-line tailwinds to the brand, we remain upbeat on the stock at these levels.”

Stifel analyst Jim Duffy reiterated a Buy rating and a $38.00 per share price target and says the valuation remains “compelling” at these levels.

“FY3Q showed acceleration in Americas that has continued into FY4Q and inflection in both Europe and Retail/DTC, two high margin contributors. Importantly, product cost visibility is locked through 1HFY22 at +MSD% and visibility is building to +MSD% for 2HFY22 suggesting inflationary pressure to margin (including higher cotton costs) is manageable. Estimates move higher on fundamental strength and the accretive contribution of Beyond Yoga. We remain compelled by structural shifts in the business and the multi-year denim upgrade cycle. Considering the high-single digit growth opportunities, structural margin potential to mid-teens, and balance sheet optionality we view the valuation compelling at current levels,| Duffy said in a note sent to clients.

Shares of LEVI closed at $24.24 yesterday.