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Will Soft Sales Weigh Down Hanesbrands (HBI) Q2 Earnings?

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Hanesbrands Inc. (HBI - Free Report) is slated to report second-quarter 2017 results on Aug 1, after the closing bell. Investors are keen to know whether this leading apparel retailer will be able to deliver a positive earnings surprise in the to-be-reported quarter. We note that the company’s earnings have missed the Zacks Consensus Estimate in two of the past four quarters, leading to an average negative surprise of 1.74%.

Let’s see how things are shaping up prior to this announcement.

Which Way are Estimates Trending

A look at the estimate revision gives us an idea regarding analyst’s expectations before the company releases its earnings. The Zacks Consensus Estimate for earnings in the second quarter and the fiscal 2017 have remained stable over the past 30 days. The Zacks Consensus Estimate of 53 cents in the said quarter reflects a year-over-year growth of 3.4% and is also within the management’s guided range of 51–54 cents of adjusted earnings. Further, the Zacks Consensus Estimate of $1.97 for fiscal 2017 reflects year-over-year growth of 6.7%.

Analysts polled by Zacks expect revenues of $1.65 billion for the quarter under review, an increase of 11.7% from the year-ago period.  The same for fiscal 2017 is pegged at $6.5 billion.

What Does the Zacks Model Unveil?

Our proven model does not conclusively show that Hanesbrands is likely to beat earnings estimates this quarter. This is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1(Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP  Filter.

Hanesbrands has an Earnings ESP of 0.00% as the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 53 cents. Moreover, the company carries a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Hanesbrands Inc. Price, Consensus and EPS Surprise

 

Factors at Play

Hanesbrands has been witnessing lower-than-expected sales for the past few quarters, mainly due to soft sales at its brick-and-mortar stores. In fact, the company’s sales have lagged the Zacks Consensus Estimate in 12 of the past 13 quarters. The company projects organic sales for the to-be-reported quarter to decline due to the current retail sales scenario along with a timing shift of back-to-school shipments.

Further, the company is witnessing headwinds such as intense competition in its premium brands, adverse foreign currency translations and sluggish traffic at its stores. Such factors have been pulling down the stocks of the company. Its shares have underperformed the broader Consumer Discretionary sector over the past one year.  In the said time frame, Hanesbrands’ shares have declined 10.3% while the sector depicted  growth of 16.9%.

 

Although the company’s recently launched Project Booster Program is expected to drive investment for growth and minimize costs, benefits from the same are not anticipated in the near term.

Still Interested in Consumer Discretionary Stocks? Check these

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

Time Warner Inc. (TWX - Free Report) has an Earnings ESP of +4.24% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cedar Fair, L.P. (FUN - Free Report) has an Earnings ESP of +8.74% and carries a Zacks Rank #2.

Carnival Corporation (CCL - Free Report) has an Earnings ESP of +0.46 and carries a Zacks Rank #2.

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