Hanes (HBI) Specialty Retail Top Pick for 2016 - Cowen
Get Alerts HBI Hot Sheet
Rating Summary:
8 Buy, 15 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 11 | Down: 13 | New: 18
Join SI Premium – FREE
Branded retail faces an inventory overhang, lofty sellside EPS expectations in general, and secular challenges to traditional apparel/ accessories retailing. However, valuing Hanesbrands (NYSE: HBI) with a P/E multiple similar to the Consumer Staples index average on 2017 estimates suggests 43% upside in the stock according to Cowen analyst, John Kernan.
HBI's portfolio of dominant and stable brands (Hanes, Champion, C9 by Champion) and the management's ability to make accretive/high return acquisitions create the potential for sustainable double-digit earnings growth with significant returns of cash to shareholders.
HBI's basic replenishment categories are less seasonal in general, while Champion provides exposure to the faster growing athleisure category. Expansion of X-Temp and ComfortBlend add additional sales drivers to support our EPS estimate of $1.89 vs. consensus of $1.90. Traffic is stable and Inventory has been well managed at two key vendors (WMT and TGT) which represent 41% of sales - limiting markdowns.
The DBA, and Knights Apparel transactions and improvement at Maidenform could add $128MM to EBIT into 2018 or +$0.27 to EPS. Cash flow from operations will improve in 2016 after several one-time items - inventory build and pension contribution pass. Sector valuation contraction should support HBI's ability to find acquisitions.
The $38 price target equates to 17.5x FY17E EPS and 25x FY17E free cash flow. The only company in the Specialty Retail And Apparel space that generates higher ROIC than HBI is NKE. No change to Outperform rating.
For an analyst ratings summary and ratings history on Hanesbrands click here. For more ratings news on Hanesbrands click here.
Shares of Hanesbrands closed at $29.14 yesterday.
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Midday movers: Travelers, JB Hunt fall; United Airlines rises
- Travelers (TRV) PT Lowered to $214 at Morgan Stanley
- Barclays Reiterates Overweight Rating on United Airlines (UAL)
Create E-mail Alert Related Categories
Analyst CommentsRelated Entities
Cowen & Co, EarningsSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!