Citi cuts Gildan Activewear target to $60, maintains Buy rating

On Wednesday, Citi analysts adjusted their outlook on Gildan Activewear (TSX:GIL:CN) (NYSE: GIL), reducing the price target from $62.00 to $60.00, while still endorsing the stock with a Buy rating. The adjustment comes ahead of the company’s first-quarter earnings report, which is scheduled for release on April 29. According to InvestingPro data, the company currently trades at a P/E ratio of 17x and has demonstrated strong financial health with a current ratio of 2.22x, indicating robust liquidity. InvestingPro analysis suggests the stock is currently undervalued relative to its Fair Value.

Analysts at Citi predict a modest outperformance in Gildan’s first-quarter earnings per share (EPS), citing the company’s advantageous positioning in the current tariff environment. Gildan, known for its printwear and basics, operates predominantly out of Honduras, a location that offers a competitive edge given the potential for higher reciprocal tariffs on Asian countries compared to Honduras’s 10%. The company has maintained strong fundamentals, with InvestingPro data showing a healthy EBITDA of $814.55 million and a solid return on equity of 23% over the last twelve months.

The firm anticipates that Gildan will gain market share as customers shift away from Chinese and Asian production in search of near-shore manufacturing options. Citi expects management to express a positive outlook regarding the impact of tariffs on the company’s long-term business during the upcoming earnings call.

Despite a 24% drop in Gildan’s share price from its February peak and an 8% decline since April 2, Citi believes the market has not fully appreciated Gildan’s potential as a beneficiary in the new tariff landscape. The analysts highlight the upcoming earnings call as an opportunity for Gildan to reaffirm its strong market position and the resilience of its business model. InvestingPro reveals that Gildan has raised its dividend for 4 consecutive years and maintains a moderate debt level, with several more exclusive insights available to subscribers. The company’s comprehensive Pro Research Report, part of InvestingPro’s coverage of 1,400+ US equities, offers detailed analysis for informed investment decisions.

Citi has also initiated a 30-day positive catalyst watch for Gildan Activewear, signaling a period during which the firm anticipates potential market-moving events or announcements that could positively impact the stock’s performance.

In other recent news, Gildan Activewear Inc (NYSE:GIL). reported its fourth-quarter 2024 earnings, surpassing market expectations with an earnings per share (EPS) of $0.83, beating the forecast of $0.81. The company also announced revenue of $822 million, exceeding the expected $811.1 million, marking a 5% year-over-year increase. Additionally, Gildan has priced a C$700 million offering of senior unsecured notes, which includes three series of notes due in 2028 and 2030. The proceeds from this offering are intended to repay outstanding debts and for general corporate purposes. BMO Capital Markets has updated its outlook on Gildan, raising the price target to $64 from $58 while maintaining an Outperform rating, reflecting confidence in Gildan’s growth drivers and competitive advantage in low-cost manufacturing. Organizational changes were also announced, with the planned retirement of the Chief Financial Officer and the promotion of a new Chief Operating Officer. Gildan’s management expressed optimism about sustained organic growth, expecting 75% of the 2025 growth to come from new programs. The company’s innovation pipeline and international sales have been highlighted as significant contributors to its growth trajectory.

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