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Hanesbrands (HBI) Queued for Q4 Earnings: Key Things to Note

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Zacks Equity Research
·5 min read
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Hanesbrands Inc. HBI is likely to display declines in the top and bottom lines, when it releases fourth-quarter 2020 numbers on Feb 9. The Zacks Consensus Estimate for revenues is pegged at $1,645 million, which suggests a decrease of 7.2% from the figure reported in the prior-year quarter. For 2020, the consensus mark is pegged at $6.5 billion, indicating a decline of 6.9%.

The Zacks Consensus Estimate for the bottom line has remained unchanged in the past 30 days at 29 cents per share, which, however, calls for a year-over-year slump of 43.1%. For 2020, the consensus mark is pinned at $1.35 per share, indicating a plunge of 23.3%. Notably, Hanesbrands’ bottom line has outperformed the Zacks Consensus Estimate by 16.7% in the last reported quarter and by a significant margin over the trailing four quarters, on average.

Hanesbrands Inc. Price, Consensus and EPS Surprise

Hanesbrands Inc. Price, Consensus and EPS Surprise
Hanesbrands Inc. Price, Consensus and EPS Surprise

Hanesbrands Inc. price-consensus-eps-surprise-chart | Hanesbrands Inc. Quote

Key Factors to Note

Hanesbrands has been bearing the brunt of limitations associated with the pandemic. The company’s fourth-quarter guidance, issued during the last earnings call, underlines pandemic-related uncertainty, including the recent lockdowns and curfews in Europe. For the quarter to be reported, net sales are anticipated in the range of $1.60-$1.66 billion. The mid-point of the guidance suggests a decline of 7% year over year. When the mid-point of the guidance is compared with rebased figures to reflect the exits of the C9 Champion and DKNY programs, the fourth-quarter sales are likely to have fallen nearly 2%. Also, adjusted earnings per share (EPS) are envisioned in the band of 25-30 cents for the quarter. When the mid-point of the guidance is compared with rebased figures to reflect the exits of the C9 Champion and DKNY programs, the fourth-quarter adjusted EPS is likely to have plunged roughly 39%.

We note that the company has been battling soft sales at its Activewear segment for quite some time now. In third-quarter 2020, sales in the U.S. Activewear business plummeted 41%. When compared with the prior-year quarter’s rebased sales figure to reflect the exit of the C9 Champion program, the metric fell 27%. Majority of decline in the segment was due to weakness in the sports apparel business, stemming from the coronavirus-related problems like cancelled sporting events and shutting of college bookstores. Apart from this, the company has been grappling with strained margins for a while now. In fact, management expects fourth-quarter gross and operating margins to reflect the impacts of negative manufacturing variances and elevated SG&A expenses.

Nonetheless, focus on Project Booster and other cost-saving initiatives are noteworthy. The company earlier stated that it anticipates to save nearly $200 million in 2020 from its cost-saving efforts amid the coronavirus pandemic. Apart from this, Hanesbrands has undertaken a number of measures to stay afloat amid the crisis. The company has developed a product line of personal protective garments, which resonates well with the current scenario commercial and consumer demand. Markedly, Hanesbrands sold personal protective garments worth $179 million worldwide during the third quarter. Moreover, the company has been selling face masks to customers globally under its brand names, including Hanes, Champion, Bonds and Dim. Hanesbrands stated that it estimated selling $50 million worth of protective garments in the fourth quarter.

Additionally, the company’s online business has been doing well, especially amid the pandemic. During the third quarter, the company registered online sales growth of approximately 70% year over year on a rebased basis via its e-commerce websites, retailer websites, business-to-business customers and large internet pure-plays.

What the Zacks Model Unveils

Our proven model does not predict an earnings beat for Hanesbrands this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Hanesbrands currently carries a Zacks Rank #5 (Strong Sell) and has an Earnings ESP of 0.00%.

Stocks With Favorable Combinations

Here are some companies you may want to consider, as our model shows that these too have the right combination of elements to post an earnings beat this season.

Steve Madden SHOO currently has an Earnings ESP of +1.61% and flaunts a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Under Armour UAA has an Earnings ESP of +8.59% and carries a Zacks Rank #3, at present.

Guess? GES has an Earnings ESP of +2.91% and a Zacks Rank #3, currently.

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