HanesBrands Ups FY13 EPS View

Zacks

Basic apparels provider HanesBrands Inc. (HBI) recently raised its earnings expectation for full year 2013 in the range of $3.25 to $3.40 per share, from the previous low $3 range, following early repayment of long-term debt.

HanesBrands has repaid $250 million 8% Senior Notes due 2016, the repayment of which was earlier expected in December 2013. This has reduced the company’s long term debt to $1.25 billion and thereby its interest expenses.

The company now expects interest expense of approximately $120 million for full-year 2013. The company remains committed to prepay the remaining $250 million of 8% notes in 2013.

In addition, the company expects a pretax charge of approximately $34 million related to debt prepayment expenses and non-cash unamortized debt costs to impact fourth quarter 2012 results. The company also reiterated its sales and earnings guidance for the fourth quarter of 2012. Net sales are expected in the range of approximately $1.13 billion to $1.17 billion and earnings in the range of $1.00 to $1.06 per share.

For full-year 2012, HanesBrands affirmed its earnings guidance in the range of $2.54 to $2.60 per share. Net sales is expected in the range of approximately $4.6 billion to $4.7 billion and free cash flow in the range of $300 million to $400 million.

Hanesbrands, which released its third quarter 2012 results on October 25, posted earnings of $1.11, up 31% from the prior-year quarter, on strong sales. Earnings outpaced the Zacks Consensus Estimate of $1.05 per share. Quarterly revenues inched up 2.5% to $1.219 billion, driven by sales growth in both Innerwear and Outerwear segments. This was almost in line with the Zacks Consensus Estimate of $1.224 billion.

The Zacks Consensus Estimate for the fourth quarter and fiscal year 2012 is pegged at $1.03 and $2.58 per share, respectively.

The company has a strong balance sheet and intends to use its free cash flow to reduce long-term debt. Currently, Hanesbrands carries a Zacks #2 Rank (short-term Buy rating) whereas its peer Limited Brands Inc. (LTD) carries a Zacks #3 Rank (short-term Hold rating).

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