UPDATE: ISI Group Raises PT to $35 on Hanesbrands on Margin Outlook

ISI Group reiterated its Hold rating on Hanesbrands

but increased its price target from $30 to $35. ISI Group commented, "Both gross and operating margins improved sequentially for the second consecutive quarter, and we were encouraged to hear that cotton inflation is officially in the rear view mirror, with lower y-o-y costs beginning in 4Q. HBI achieved its 32.8% gross margin in 3Q despite cotton costs of $1.33/lb in the quarter (vs. $0.97/lb last year), and we think the gross margin tailwind over the next few quarters could be significant as HBI begins to lap the highest cost cotton quarters (4Q11 cotton cost was $1.74/lb). And although HBI is still far from its historical peak gross margin of 35+% achieved in 2003, we think it could approach its more normalized run-rate margin of 33% as early as next year." Hanesbrands closed at $33.35 on Tuesday.