DA Davidson Raises Price Target & Estimates on Hanesbrands (HBI), Impressive Operating Leverage Potential

DA Davidson is maintaining its Buy rating on shares of Hanesbrands (NYSE: HBI) and is raising its price target from $37 to $40 following its Q1 results.

The company released its Q1 results with an EPS of $0.49 and a revenue of $1.036 billion, ahead of the firms estimates of $0.34 and $1.016 billion. Gross margin for the quarter was down 108bps Y/Y to 34.2% due to cotton costs and limited pricing benefit. Inventory was up 30% Y/Y compared to revenue growth of 11.7%, which reflects higher product costs and Gear for Sports inventory.

HBI raised its FY11 low end revenue guidance from $4.85 billion to $4.9 billion and is reiterating its high end estimate of $5 billion. FY11 EPS was raised from $2.60-$2.80 to $2.70-$2.90.

To go inline with the market trends and the company's new guidance, the firm is raising its Q2 revenue and EPS estimates from $1.214 billion and $0.89 to $1.221 billion and $0.86. It is also raising its FY11 estimates from $4.875 billion and $2.73 to $4.921 billion and $2.85, and its 2012 estimates from $5.205 billion and $3.10 to $5.254 billion and $3.19.

For more ratings news on Hanesbrands click here and for the rating history of Hanesbrands click here.

Shares of Hanesbrands closed at $30.99 yesterday.

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