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Rising Input Costs a Worry for Hanesbrands (HBI) Q2 Earnings
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Hanesbrands Inc. (HBI - Free Report) is slated to release second-quarter 2018 results on Aug 1. The company is likely to gain from its solid international business, benefits from buyouts and strong online sales. However, rising input costs may hurt margins and weigh on the bottom line.
Well, this designer and manufacturer of apparel for men, women and children delivered a positive earnings surprise in the last reported quarter, though it has a mixed earnings surprise record over the trailing four quarters. Let’s see what’s in store for the company this time around.
Online Strength, Buyouts Remain Drivers
Hanesbrands has long been gaining from strength in its International business, which contributed nearly 39% of the company’s net sales in the first quarter of 2018. Sales for the segment improved 19.4% to $569.9 million, backed by favorable currency movements, acquisition synergies (including old and latest buyout of Bras N Things) and organic growth. Notably, organic sales jumped 7% on a currency-neutral basis and organic consumer-directed sales ascended 22%, which represented about 28% of International sales. Management remains focused on making investments and innovations internationally, which remain major growth drivers. Talking of organic sales, the company has been posting organic sales growth for three straight quarters now. In the last reported quarter, organic sales growth was fueled by better-than-expected Champion sales across all regions as well as solid online sales.
Online strength is another major driver for Hanesbrands, wherein online sales surged 20% year over year in the first quarter of 2018, fueled by growth across all regions. Together, the company’s Global consumer-directed sales (including retail and online networks) formed 21% of its overall sales. Hanesbrands, which is a global partner with Amazon (AMZN - Free Report) , remains focused on making incremental investments in its online business, in order to keep pace with consumers’ evolving shopping patterns. That said, management remains committed toward driving continued double-digit growth online/consumer-direct sales. These factors, along with benefits from acquisitions, remain major tailwinds for Hanesbrands’ top line. Markedly, contributions from acquisitions (Bras N Things and Alternative Apparel) played a significant role in augmenting Hanesbrands’ first-quarter sales. Apart from this, the company has largely been gaining from contributions from Champion Europe and Hanes Australasia that were acquired in 2016. Management remains committed toward driving continued double-digit growth for global Champion sales.
However, we remain apprehensive about Hanesbrands’ Innerwear segment that has been struggling soft sales for quite some time now. In first-quarter 2018, U.S. Innerwear sales fell 2.8%, owing to declines across both Inmates and Basics. Inmates sales tumbled nearly 7%, whereas Basics slipped 1%. For the quarter under review, the Zacks Consensus Estimate for Activewear, Innerwear and International sales are pegged at $389 million, $710 million and $521 million compared with the year-ago reported figures of $380 million, $719 million and $475 million, respectively.
For the second quarter, management projects total net sales in a band of $1.7 billion to $1.725 billion. The Zacks Consensus Estimate for overall company sales of $1.72 billion indicates year-over-year growth of 4.2%.
Will Input Costs Hurt Bottom Line?
Though we remain encouraged about Hanesbrands’ sales drivers, we cannot ignore the cost-related headwinds looming over the company. Evidently, Hanesbrands is battling raw-material inflation, which hurt the company’s margins in the first quarter of 2018. During the quarter, the company was hit by raw-material inflation to the tune of about $14 million. Battered by this headwind, adjusted gross margin contracted 10 bps to 40.1% in the quarter. This, along with escalated SG&A costs, weighed on adjusted operating margin that fell 60 bps to 11.3%.
Unfortunately, management expects these hurdles to persist in 2018, when it expects witnessing higher commodity and marketing expenses. Also, the company remains cautious about a challenging consumer environment and brick-and-mortar store closures. These factors remain threats to the company’s performance in the quarter under review. Management envisions adjusted earnings per share for the second quarter in a band of 44-46 cents. The Zacks Consensus Estimate for Hanesbrands’ earnings has remained stable over the past 30 days at 46 cents per share, which however shows a decline of nearly 13.2% from the year-ago period earnings.
What Does the Zacks Model Unveil?
Our proven model doesn’t show that Hanesbrandscan beat bottom-line estimates this quarter. For this to happen, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Though Hanesbrands carries a Zacks Rank #2, the company’s Earnings ESP of -1.25% makes surprise prediction difficult.
Stocks Poised to Beat Earnings Estimates
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post earnings beat:
Columbia Sportswear (COLM - Free Report) has an Earnings ESP of +19.90% and a Zacks Rank of 1.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
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Rising Input Costs a Worry for Hanesbrands (HBI) Q2 Earnings
Hanesbrands Inc. (HBI - Free Report) is slated to release second-quarter 2018 results on Aug 1. The company is likely to gain from its solid international business, benefits from buyouts and strong online sales. However, rising input costs may hurt margins and weigh on the bottom line.
Hanesbrands Inc. Price and EPS Surprise
Hanesbrands Inc. Price and EPS Surprise | Hanesbrands Inc. Quote
Well, this designer and manufacturer of apparel for men, women and children delivered a positive earnings surprise in the last reported quarter, though it has a mixed earnings surprise record over the trailing four quarters. Let’s see what’s in store for the company this time around.
Online Strength, Buyouts Remain Drivers
Hanesbrands has long been gaining from strength in its International business, which contributed nearly 39% of the company’s net sales in the first quarter of 2018. Sales for the segment improved 19.4% to $569.9 million, backed by favorable currency movements, acquisition synergies (including old and latest buyout of Bras N Things) and organic growth. Notably, organic sales jumped 7% on a currency-neutral basis and organic consumer-directed sales ascended 22%, which represented about 28% of International sales. Management remains focused on making investments and innovations internationally, which remain major growth drivers. Talking of organic sales, the company has been posting organic sales growth for three straight quarters now. In the last reported quarter, organic sales growth was fueled by better-than-expected Champion sales across all regions as well as solid online sales.
Online strength is another major driver for Hanesbrands, wherein online sales surged 20% year over year in the first quarter of 2018, fueled by growth across all regions. Together, the company’s Global consumer-directed sales (including retail and online networks) formed 21% of its overall sales. Hanesbrands, which is a global partner with Amazon (AMZN - Free Report) , remains focused on making incremental investments in its online business, in order to keep pace with consumers’ evolving shopping patterns. That said, management remains committed toward driving continued double-digit growth online/consumer-direct sales. These factors, along with benefits from acquisitions, remain major tailwinds for Hanesbrands’ top line. Markedly, contributions from acquisitions (Bras N Things and Alternative Apparel) played a significant role in augmenting Hanesbrands’ first-quarter sales. Apart from this, the company has largely been gaining from contributions from Champion Europe and Hanes Australasia that were acquired in 2016. Management remains committed toward driving continued double-digit growth for global Champion sales.
However, we remain apprehensive about Hanesbrands’ Innerwear segment that has been struggling soft sales for quite some time now. In first-quarter 2018, U.S. Innerwear sales fell 2.8%, owing to declines across both Inmates and Basics. Inmates sales tumbled nearly 7%, whereas Basics slipped 1%. For the quarter under review, the Zacks Consensus Estimate for Activewear, Innerwear and International sales are pegged at $389 million, $710 million and $521 million compared with the year-ago reported figures of $380 million, $719 million and $475 million, respectively.
For the second quarter, management projects total net sales in a band of $1.7 billion to $1.725 billion. The Zacks Consensus Estimate for overall company sales of $1.72 billion indicates year-over-year growth of 4.2%.
Will Input Costs Hurt Bottom Line?
Though we remain encouraged about Hanesbrands’ sales drivers, we cannot ignore the cost-related headwinds looming over the company. Evidently, Hanesbrands is battling raw-material inflation, which hurt the company’s margins in the first quarter of 2018. During the quarter, the company was hit by raw-material inflation to the tune of about $14 million. Battered by this headwind, adjusted gross margin contracted 10 bps to 40.1% in the quarter. This, along with escalated SG&A costs, weighed on adjusted operating margin that fell 60 bps to 11.3%.
Unfortunately, management expects these hurdles to persist in 2018, when it expects witnessing higher commodity and marketing expenses. Also, the company remains cautious about a challenging consumer environment and brick-and-mortar store closures. These factors remain threats to the company’s performance in the quarter under review. Management envisions adjusted earnings per share for the second quarter in a band of 44-46 cents. The Zacks Consensus Estimate for Hanesbrands’ earnings has remained stable over the past 30 days at 46 cents per share, which however shows a decline of nearly 13.2% from the year-ago period earnings.
What Does the Zacks Model Unveil?
Our proven model doesn’t show that Hanesbrandscan beat bottom-line estimates this quarter. For this to happen, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Though Hanesbrands carries a Zacks Rank #2, the company’s Earnings ESP of -1.25% makes surprise prediction difficult.
Stocks Poised to Beat Earnings Estimates
Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post earnings beat:
Guess? (GES - Free Report) , a Zacks #2 Ranked company, has an Earnings ESP of +4.08%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Columbia Sportswear (COLM - Free Report) has an Earnings ESP of +19.90% and a Zacks Rank of 1.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>