Goldman Sachs Initiates Coverage on HBI with a Buy Rating and $50 PT on Valuation

In a report published by Goldman Sachs, analyst Taposh Bari initiated coverage on HBI

with a Buy rating and a 12-month $50 price target. Goldman Sachs reported that, “We see the HBI investment story evolving from cotton sensitivity to capital allocation over the next 12 months. Gross margins still have a few quarters of upside as the company anniversaries a difficult 2012 for the Outerwear segment. The story only accelerates once that ends, however. The company is expected to prepay the remaining $250 mn of its 2016 senior notes by year‘s end. That event will liberate management to redeploy its 12% free cash flow yield to equity holders. The first order of business is likely a 2% dividend (20-25% of free cash flow). We expect the remaining 75-80% to be distributed through a combination of share buybacks and bolt-on M&A.” Shares of HBI closed at $42.03 on Thursday.