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Factors to Watch Ahead of Hanesbrands' (HBI) Q1 Earnings

Zacks Equity Research

Hanesbrands Inc. HBI is scheduled to release first-quarter 2019 results on May 2. This provider of apparel essentials has a mixed earnings surprise record over the trailing four quarters.

Let’s see how things are placed ahead of the upcoming quarterly results.

Hanesbrands Inc. Price and EPS Surprise

Hanesbrands Inc. Price and EPS Surprise | Hanesbrands Inc. Quote

What to Expect?

The Zacks Consensus Estimate has remained stable in the past 30 days at 25 cents, which indicates close to 4% decline from the year-ago quarter’s figure. Nonetheless, the consensus mark for revenues is $1,534 million compared with $1,472 million reported in the year-ago period.

Factors Impacting Results

Hanesbrands is likely to witness organic sales growth in the quarter to be reported. Notably, the company’s organic sales have been rising year over year for quite some time, backed by increased sales from Activewear and International units, mainly fueled by strength in Champion. The company’s International unit has long been contributing to organic sales, which are likely to act as a tailwind in the upcoming quarterly results. Notably, management’s focus on making investments and innovations internationally is a driver for this segment, and likely to have an impact this time around as well.

However, the company’s Innerwear unit has been struggling for a while, owing to several extended bankruptcies and store closures. Consequently, Hanesbrands is quite conservative about its Innerwear segment, wherein sales are anticipated to fall 4% in the first quarter, mainly owing to retail store closures. Additionally, currency headwinds are expected to hit sales in the first quarter. Nonetheless, overall sales are likely to benefit from strength in the International and Activewear segments. Moreover, Hanesbrands’ acquisitions are likely to contribute to top-line growth. Evidently, management expects Bras N Things to contribute to sales growth in the first quarter of 2019, wherein net sales are expected to be $1.52-$1.55 billion.

Markedly, the Zacks Consensus Estimate for net sales at the International and Activewear segments is currently pegged at $609 million and $381 million, suggesting an increase from $570 million ad $346 million reported in the year-ago period, respectively. However, the consensus mark for Innerwear segment sales stands at $470 million, implying a drop of 4.3% from the year-ago quarter’s reported figure.

Will Cost Woes Linger?

Raw-material inflation has been a hurdle for past few quarters and is a threat for the bottom line this time as well. We, however, expect some respite from savings from the company’s Project Booster program. For the quarter to be reported, adjusted EPS is envisioned to be 24-26 cents.

What the Zacks Model Unveils

Our proven model shows that Hanesbrands is likely to beat bottom-line estimates this quarter.  For this to happen, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Hanesbrands carries a Zacks Rank #3, which along with its Earnings ESP of +3.18% makes us reasonably confident of earnings beat.  

Other Stocks Poised to Beat Earnings Estimates

Estee Lauder EL has an Earnings ESP of +0.77% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Church & Dwight CHD has an Earnings ESP of +1.06% and a Zacks Rank #2.

Inter Parfums IPAR has an Earnings ESP of +0.30% and a Zacks Rank #2.

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