Hanesbrands (HBI) posted solid third quarter 2012 results with earnings of $1.11 per share, which outpaced the prior-year earnings by 31% and the Zacks Consensus Estimate by 5.7%. The upswing was driven by strong sales growth in both Innerwear and Outerwear segments.
Overall, we are impressed with the company’s strong portfolio of brands and its continuous innovations. Efficiency in initiatives has led to substantial cost savings, and the company is also taking efforts to optimize its inventories, reduce long-term debt and de-leverage its balance sheet.
Despite currency and cotton cost headwinds, Hanesbrands anticipates its earnings to improve in fiscal 2012 and 2013. Based on our 2012 earnings estimate of $2.58, the stock is trading at 13.8x, which is a 15.9% discount to the industry average of 16.4x. Our target price of $43.00 is based on approximately 16.7x our 2012 earnings estimate.
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