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Citi has maintained its Neutral stance on Hanesbrands (NYSE: NYSE:HBI), with a set price target of $6.50.
The firm anticipates the company to post third-quarter earnings per share (EPS) of $0.11, which is slightly below the consensus estimate of $0.12 but within the company's own guidance range of $0.09 to $0.14.
Sales are expected to decline by 2.5%, in line with the consensus of a 2.6% decrease and within the guided range of a 1-4% drop.
Citi projects that management will offer fourth-quarter EPS guidance ranging from $0.10 to $0.15, compared to a consensus estimate of $0.13. The focus for Hanesbrands going into 2025 is believed to be on the innerwear business's health.
Two critical questions are poised to influence Hanesbrands' trajectory: the specifics of cost savings versus stranded costs after the sale of the Champion brand, and the drivers behind management's long-term expectation for innerwear to achieve low single-digit growth, despite its historical market share loss and consistent decline.
In other recent news, Hanesbrands' earnings report showed a 4% decrease in net sales to $995 million, but with improvements in gross and operating margins which rose to 39.8% and 12.7% respectively. The full-year sales are projected to decrease by 2%, but the company expects a 36% increase in operating profit.
Stifel has reaffirmed its Hold rating on Hanesbrands, incorporating new data following the sale of the global Champion business to Authentic Brands Group. This sale is part of a broader strategic realignment, which also includes the divestiture of its U.S. outlet store business and the departure of Vanessa LeFebvre, President of Activewear – Global.
Hanesbrands has confirmed its plan to reduce its debt by approximately $1 billion in the second half of 2024, funds from the Champion transaction included. The company anticipates a significant increase in earnings per share (EPS) in the coming years, driven by cost reductions, margin expansion, and strategic brand investments.
InvestingPro Insights
Recent InvestingPro data provides additional context to Citi's analysis of Hanesbrands (NYSE:HBI). The company's market cap stands at $2.41 billion, with a P/E ratio of -74.96 for the last twelve months as of Q2 2024. This negative P/E ratio aligns with Citi's caution about the company's valuation, despite the apparent low price-to-earnings multiple.
InvestingPro Tips highlight that Hanesbrands' stock has shown strong performance recently, with a 40.74% price total return over the past six months and a 57.97% return over the last year. This upward trend could be influencing investor sentiment, despite the challenges noted by Citi.
Interestingly, while Citi focuses on the potential decline in sales, InvestingPro data shows that Hanesbrands' revenue grew by 8.45% in the last twelve months as of Q2 2024. However, the quarterly revenue growth for Q2 2024 was -3.83%, which aligns more closely with Citi's projections for the upcoming quarter.
It's worth noting that InvestingPro offers 13 additional tips for Hanesbrands, providing a more comprehensive analysis for investors looking to delve deeper into the company's prospects.
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