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On Monday, Barclays (LON:BARC) initiated coverage on Gildan Activewear (NYSE:GIL) shares, assigning an Overweight rating and setting a price target of $51.00, representing significant upside from the current price of $42.50. According to InvestingPro data, analyst targets range from $49.34 to $65.00, suggesting strong growth potential. The new rating is based on the firm’s assessment that Gildan is well-equipped to handle tariff costs due to several strategic advantages.
Paul Kearney of Barclays highlighted that Gildan does not have exposure to China sourcing, which is a significant benefit amid the current trade environment. The company’s innovative efforts this year, such as the introduction of Plasma Print technologies and Color Comfort, are expected to command higher prices, which could help offset cost pressures. This innovation-driven approach has contributed to the company’s solid financial health, earning a "GOOD" rating from InvestingPro’s comprehensive analysis.
The analyst also noted that Gildan is poised to benefit from reduced competition in the print market following the exit of Delta and the addition of the Champion license from Authentic Brands Group. The integration within the U.S. textile supply chain, including cotton sourcing, yarn spinning, and potential manufacturing synergies with the American Apparel acquisition, further strengthens Gildan’s position. These operational advantages have helped maintain a healthy gross profit margin of 30.7% and strong return on equity of 23%.
Gildan Activewear’s strong cash generation and the ability to return capital to shareholders were also emphasized. The company has maintained dividend payments for 15 consecutive years, with a current yield of 2.13%. Kearney pointed out that the company has the capacity to maintain an attractive leverage ratio between 1.5x and 2.5x, supported by its moderate debt levels and strong liquidity position. Additionally, the return on invested capital (ROIC) has been on an upward trend, currently at 19%, which may continue as the company ramps up its Bangladesh facility and moves past the phase-out of its Under Armour (NYSE:UA) contract. For deeper insights into Gildan’s financial metrics and growth potential, investors can access the comprehensive Pro Research Report available on InvestingPro.
In other recent news, Gildan Activewear has reported its fourth-quarter 2024 earnings, surpassing market expectations with an earnings per share (EPS) of $0.83 compared to the forecasted $0.81. The company also exceeded revenue expectations, reporting $822 million against the anticipated $811.1 million, marking a 5% year-over-year increase. Additionally, Gildan has announced the pricing of a C$700 million offering in senior unsecured notes, aimed at repaying outstanding debts and for general corporate purposes. BMO Capital Markets has raised its price target for Gildan to $64 from $58, maintaining an Outperform rating, following the company’s strong financial results and positive guidance for 2025. The company has also experienced significant organizational changes, including the planned retirement of its Chief Financial Officer and the promotion of a new Chief Operating Officer. Citi analysts have adjusted their outlook on Gildan, reducing the price target to $60 but maintaining a Buy rating, with expectations of a modest outperformance in the upcoming earnings report. These developments highlight Gildan’s strategic direction and potential market position in the evolving tariff landscape.
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