A month has gone by since the last earnings report for HanesBrands (HBI Quick QuoteHBI - Free Report) . Shares have added about 2.9% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is HanesBrands due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Hanesbrands Q1 Earnings Beat Estimates, Sales Grow Y/Y

Hanesbrands reported first-quarter 2021 adjusted earnings of 39 cents a share that surpassed the Zacks Consensus Estimate of 26 cents. Also, the metric increased from 7 cents reported in the year-ago quarter.

Net sales rallied 25.3% to $1,508 million and outpaced the Zacks Consensus Estimate of $1,498 million. Further, total constant currency (cc) net sales increased 22%. Hanesbrands delivered double-digit growth in both global innerwear and activewear businesses on the back of strong point-of-sale performance in all key channels. Notably, online channel registered 82% growth. Also, the company benefited from market share gains across major categories. Apart from these, favorable year-over-year comparison owing to initial pandemic shutdowns in the year-ago quarter and specific one-time contributions also led to the upside. The company’s champion brand remained solid owing to strong consumer demand. Also, the company gained market share in U.S. Innerwear.

Adjusted gross margin of 40.2% expanded 360 basis points (bps). Leverage from higher sales volume, favorable product mix, positive impacts from currency translations and gains from SKU reduction efforts among others contributed to the upside. However, these were somewhat negated by increased transportation costs.

Moving on, adjusted operating profit of $210 million increased significantly from $72 million reported in the year-ago quarter. Further, adjusted operating margin expanded 790 bps to 13.9% owing to solid gross margin performance and SG&A leverage from increased sales. These were fully offset by higher brand marketing investments.

Segment Details

Innerwear: Sales in the U.S. Innerwear segment of $570 million increased 35% year over year driven by point-of-sale growth and market share gains. Also, the overlap of the initial COVID-19-led closures and specific one-time benefits were a driver. Further, basics revenues surged 39% while intimates revenue jumped 27% in the segment.

Activewear: Sales in the U.S Activewear segment surged 26% to $364 million on the back of online growth, including Champion.com as well as pure play and retail partner sites. Also, robust performance in wholesale brick and mortar channels as well as the overlap of the initial pandemic shutdown and benefits from government stimulus aided growth. Notably, Champion sales increased 34%, while revenues from the company’s other activewear brands increased 16%. That said, the company’s sports and college licensing business remained challenged by campus shutdowns and restrictions on sports attendance amid the pandemic.

International: Revenue in the International business increased 18%. On a cc basis, sales increased 8%. During the quarter, the company witnessed sales growth in the Americas, Australia and Europe on a cc basis. However, the metric was down in Asia Pacific region owing to pandemic-led hurdles in Japan.

Other Financial Details

Hanesbrands ended the quarter with cash and cash equivalents of $530.4 million, long-term debt of $3,649.6 million and total stockholders’ equity of $484.5 million. For quarter ended Apr 3, 2021 the company generated $16.9 million as net cash from operating activities.

Additionally, management declared a quarterly cash dividend of 15 cents per share, which is payable on Jun 1, 2021, to shareholders of record as of May 21. This marks the company’s 33rd straight quarterly return of cash to shareholders. Hanesbrands has paid out quarterly dividends worth $1.4 billion since the program began in April 2013.

Guidance

For the second quarter of 2021, net sales are anticipated in the range of $1.56-$1.59 billion. The midpoint of the guidance represents net sales advancement of nearly 2% year over year and includes an expected gain of roughly $35 million from favorable currency movements. Excluding PPE, net sales at the midpoint are likely to surged 69% year over year. Adjusted operating profit is likely to be in the range of $200-$210 million in the quarter. At the midpoint, this indicates an operating margin of 13% compared with 15.2% in the year-ago period. The anticipated margin contraction is likely to come due to inflation and higher brand investment. Also, adjusted earnings per share are envisioned in a band of 37-40 cents in the second quarter.

For 2021, net sales are anticipated in the range of $6.2-$6.3 billion, including nearly $100 million benefits from favorable currency rates. The midpoint of the guidance represents net sales advancement of nearly 2% year over year. Adjusted operating profit is likely to be in the range of $815-$845 million in 2021. At the midpoint, this indicates an operating margin of 13.3% compared with 12.7% in the year-ago period. Also, adjusted earnings per share are envisioned in a band of $1.51-$1.59 in 2021.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, HanesBrands has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, HanesBrands has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.