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A Look at Hanesbrands’ Profit Expectations for Fiscal 2017

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Apr. 25 2017, Updated 6:38 a.m. ET

Operating margin to decline in fiscal 2017

Hanesbrands’ (HBI) management has predicted an operating profit range of $935 million–$975 million for fiscal 2017. This forecast translates to 4.5% YoY (year-over-year) growth at the midpoint. In fiscal 2016, operating profit grew 6.2% YoY to $914 million.

Operating margin, however, is expected to decline 50 basis points in fiscal 2017 due to the short-term dilution from lower-margin acquisitions. The company is awaiting, however, a meaningful improvement in margins over the next two to three years as it starts to reap the synergy benefits from its Pacific Brands and Champion Europe acquisitions.

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Fiscal 2017 earnings per share expectations

HBI’s earnings are likely to land between $1.93 and $2.03 in fiscal 2017, growing 7% at the midpoint. The company’s earnings grew 11% YoY in 2016 and stood at $1.85.

Wall Street is in line with management and expects a 6% YoY increase in EPS to $1.96. HBI missed consensus estimates twice during the last fiscal year.

For a view on first quarter earnings expectations, read the next part of this series.

Comparing HBI’s margins to peers

HBI has recorded better profitability than other branded apparel peers. Its trailing-12-month operating margin of 12.7% is higher than PVH Corp’s (PVH) 9.7%, VF Corp’s (VFC) 12%, and Ralph Lauren’s (RL) 3.3%. Handbag manufacturers Michael Kors (KORS) and Coach (COH), however, have higher trailing-12-month operating margins of 21% and 15%, respectively.

Investors interested in exposure to HBI can consider pooled investment vehicles like the First Trust Large Cap Value AlphaDEX Fund (FTA), which invests 0.4% of its holdings in Hanesbrands.

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