Are Hanesbrands Earnings Concerns Overblown? UBS Says Yes

While the read-through across the apparel segment has so far been lackluster, Hanesbrands Inc. HBI seems to have among the best catalyst calendars in the back half of the year, UBS’s Michael Binetti said in a report. He maintained a Buy rating on the company, with a price target of $37.

Most companies in the apparel group have pointed to “cautious 2H orders from retailers,” analyst Michael Binetti mentioned. He added, however, that Hanesbrands’ guidance announcement and most US retailers indicating improved trends in June “should mitigate 2Q EPS downside risk” for the company.

2H16 Catalyst Calendar

Binetti expects Hanesbrands to exhibit sequential progress in reducing inventories, backed by supply chain initiatives in 1Q and 2Q. He added that the company had a “solid calendar of EPS upside drivers” starting in the back half of the year, including:
The 3Q launch of its most significant innovation in core basics in years
Acquisition synergies starting to materialize
Reduction in acquisition charges

Concerns Overblown

Hanesbrands’s shares have declined 13 percent year-to-date, versus a 4 percent gain in the XRT. The company’s shares have been under pressure mainly on concerns surrounding earnings quality, given several acquisition-related charges. The analyst believes that following the pullback, the shares reflect overblown concerns over earnings quality.

Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email feedback@benzinga.com with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!