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Gildan Activewear Inc. Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next

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Gildan Activewear Inc. (TSE:GIL) last week reported its latest annual results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. Revenues were US$2.9b, approximately in line with expectations, although statutory earnings per share (EPS) performed substantially better. EPS of US$3.07 were also better than expected, beating analyst predictions by 12%. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

View our latest analysis for Gildan Activewear

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After the latest results, the eleven analysts covering Gildan Activewear are now predicting revenues of US$3.09b in 2022. If met, this would reflect a reasonable 5.8% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to decline 15% to US$2.72 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$3.10b and earnings per share (EPS) of US$2.45 in 2022. Although the revenue estimates have not really changed, we can see there's been a nice increase in earnings per share expectations, suggesting that the analysts have become more bullish after the latest result.

There's been no major changes to the consensus price target of CA$53.35, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Gildan Activewear analyst has a price target of CA$65.00 per share, while the most pessimistic values it at CA$32.31. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. One thing stands out from these estimates, which is that Gildan Activewear is forecast to grow faster in the future than it has in the past, with revenues expected to display 5.8% annualised growth until the end of 2022. If achieved, this would be a much better result than the 2.3% annual decline over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 9.8% per year. So although Gildan Activewear's revenue growth is expected to improve, it is still expected to grow slower than the industry.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Gildan Activewear following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Gildan Activewear's revenues are expected to perform worse than the wider industry. The consensus price target held steady at CA$53.35, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on Gildan Activewear. Long-term earnings power is much more important than next year's profits. We have forecasts for Gildan Activewear going out to 2024, and you can see them free on our platform here.

Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Gildan Activewear that you should be aware of.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.