TD Newcrest Upgrades Gildan Activewear (GIL) to Buy; Raises 2010 Estimates

May 15, 2009 9:47 AM EDT

TD Newcrest upgrades Gildan Activewear Inc. (NYSE: GIL) from Hold to Buy.

TD analyst says, "We’re upgrading Gildan to BUY, as we look past S/T issues and given more subdued Street expectations. Also, while the “Broder” risk is not entirely behind us, the A/R exposure and inventory glut are now much reduced with the restricted shipments through Q2. Should the minimum tender condition for Broder’s exchange offer not be met today, it will file for Ch11 bankruptcy and the risk of a ~5 months transition period remains. Despite that, we believe that the stock represents good value given the longterm growth opportunities available to Gildan, outlined in this note – but we’d caution that such news will likely cause the stock to return some of yesterday’s gains in the short term.

"We’ve increased our F10 estimates mainly owing to improved margin expectations. We believe that most issues that affected gross margins in F09 will likely be reversed in F10. Most importantly, we expect lower cotton costs, better manufacturing efficiencies, an improved product mix and better sock margins. Although we don’t foresee a full rebound in market growth, we expect continued share gains for Gildan (wholesale and screenprinter-direct) and the likely resumption of Broder shipments."

To see more analyst ratings on GIL Click Here.

Gildan Activewear Inc. (Gildan) is a marketer and manufacturer of activewear, socks and underwear. The Company is a supplier of activewear for the screenprint channel in the United States and Canada, and also a supplier for this market in Europe.

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