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Things to Note Before Hanesbrands (HBI) Reports Q1 Earnings

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Hanesbrands Inc. (HBI - Free Report) is likely to display top and bottom-line growth, when it releases first-quarter 2021 numbers on May 11. The Zacks Consensus Estimate for revenues is pegged at $1,498 million, which suggests an increase of 13.8% from that reported in the prior-year quarter.

The Zacks Consensus Estimate for the bottom line has been unchanged in the past 30 days at 26 cents per share, which suggests substantial year-over-year growth from 5 cents reported in the prior-year quarter. Notably, Hanesbrands’ bottom line has outperformed the Zacks Consensus Estimate by 31% in the last reported quarter and by a significant margin over the trailing four quarters, on average.

Key Factors to Note

The company’s first-quarter results are likely to reflect gains from its Full Potential plan’s progress, which focuses on global growth of the Champion brand, driving Innerwear unit’s growth, creating e-commerce brilliance and streamlining the global portfolio. Notably, Hanesbrands’ top line has been benefiting from its strong online operations, especially amid the pandemic. The company’s site as well as third-party suppliers are expected to have contributed to online sales growth in the to-be-reported quarter.

On the last reported quarter’s earnings call, management stated that it continues to see momentum in the e-commerce business, which also forms a core part of its Full Potential plan.

Hanesbrands Inc. Price and EPS Surprise


Hanesbrands Inc. Price and EPS Surprise

Hanesbrands Inc. price-eps-surprise | Hanesbrands Inc. Quote

Further, Hanesbrands’ first-quarter 2021 sales are expected to have gained from its focus on making incremental investments in its online business to keep pace with consumers’ evolving shopping patterns particularly as the pandemic has increased digital shopping penetration.

Moreover, the company has been benefiting from sustained revenue momentum in its biggest businesses as well as solid market share performance in the Innerwear and Activewear segments. Notably, U.S. Innerwear sales (excluding PPE) have been witnessing growth on solid point-of-sale trends, constant inventory restocking by retailers, and space gains in kids’ underwear. The continuation of the positive trends in the Innerwear business is likely to have aided the company’s top line in the first quarter.

On the last reported quarter’s earnings call, management issued an impressive view for the first quarter of 2021. It predicted first-quarter net sales of $1.485-$1.515 billion, the mid-point of which suggests 14% year-over-year growth. This includes expected gains of $50 million from favorable currency movements. At constant currency, the mid-point of the sales guidance suggests a 10% rise.

Adjusted operating profit is expected to be $150-$160 million, indicating an operating margin of 10.3% at the mid-point, whereas it reported 4.8% in the year-ago period. Increased sales, favorable manufacturing variances and the anniversary of the last year’s volume declines, stemming from the pandemic, are expected to have driven the margin expansion. Adjusted earnings per share are envisioned to be 24-27 cents for the first quarter.

Though the company issued an impressive view for the first quarter of 2021, it has been continuing to operate amid an extremely volatile landscape, given the coronavirus-related concerns and the associated restrictions enforced by governments across the world. Moreover, it has been grappling with strained margins for a while now on account of adverse manufacturing variances along with costs associated with COVID-19 as well as the Full Potential plan. Despite the positive view, the persistence of these cost headwinds is expected to have affected the margin performance in the first quarter.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Hanesbrands this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Hanesbrands currently has a Zacks Rank #3 (Hold) and an Earnings ESP of 0.00%.

Stocks With Favorable Combinations

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season.

Ralph Lauren Corporation (RL - Free Report) has an Earnings ESP of +6.25% and it currently flaunts a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Funko, Inc. (FNKO - Free Report) has an Earnings ESP of +9.70% and a Zacks Rank #2 at present.

V.F. Corporation (VFC - Free Report) has an Earnings ESP of +0.43% and a Zacks Rank #3, currently.

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