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What To Expect From Hanesbrands’ Second-Quarter Earnings

What To Expect From Hanesbrands’ Second-Quarter Earnings
By: Nancy Kross
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Hanesbrands Inc. (HBI) will announce results for the second quarter of its fiscal year 2014 (2QFY14) results on Wednesday after the market closes. The company’s revenues and adjusted earnings are expected to rise, due to the impact of the Maidenform acquisition.

The company – a spin-off of Sara Lee – has exceeded earnings estimates for the last four quarters but failed to meet revenue expectations in three out of those four. In its latest quarterly results, the company beat earnings estimates, but failed to surpass revenue projections. Adjusted net-income for the quarter increased 49% and totaled 76 cents per-share, while revenues went up 12% to reach $1.06 billion. Excluding the effect of the Maidenform acquisition, revenues remained flat in comparison to the same period last year.

In the second quarter (ended June 28), Hanesbrands’ revenues are forecasted to be $1.35 billion, implying an increase of 13%. Earnings per share (EPS), on the other hand, are estimated to grow by 26% to come at $1.5.

The company’s organic growth in the domestic market has slowed down due to saturation; however, it has been adding shareholder value through acquisitions and cost-management. After acquiring Maidenform in October 2013, the company announced the acquisition of Paris-based DBApparel, I a deal with an enterprise value of €400 million ($550 million). In addition to adding $875 million in sales and $1 to adjusted-EPS, the merger would allow Hanesbrands to increase penetration in European markets. The management may also raise its guidance - a second time this year - owing to the acquisition. Following the announcement of 1QFY14 results, the management had raised full-year earnings guidance by 20 cents, to a range of $4.8-$5.

Hanesbrands stock has been one of the best performers in the apparel category, increasing 39% year-to-date to close at $96.9 on Monday. In contrast, the S&P 500 rallied only 7%, while the Consumer Discretionary ETF (XLY) has gained less than 1% over the year. The Street is bullish on the stock, with eight of 15 analysts recommending a Buy.

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