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