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What Hanesbrands’ Management Expects from Its 2Q17 Earnings

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2Q17 earnings expectations

Hanesbrands (HBI) is scheduled to report its 2Q17 earnings results on August 1, 2017. HBI’s management has guided for EPS (earnings per share) of $0.51–$0.54 in the quarter. At the midpoint, this expectation translates to a ~3% rise over the same quarter last year.

Wall Street is in agreement with HBI’s management. It’s looking for a 4% YoY (year-over-year) rise in HBI’s EPS to $0.53 on total sales of $1.7 billion, which reflect a rise of 12% YoY. During 1Q17, the company’s EPS rose 12% to $0.29.

Management expects to incur $8 million in expenses related to Project Booster, which we discussed in the previous article.

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2017 expectations

According to HBI’s management’s guidance, its 2017 operating profit is expected to lie between $935 million and $975 million, a 4.5% rise in profit at the midpoint. In 2016, HBI’s operating profit rose 6.2% YoY to $914 million.

HBI’s operating margin is, however, likely to fall 50 basis points during the year due to short-term dilutions from lower-margin acquisitions. A significant improvement in HBI’s margins is expected over the next two to three years, primarily due to the synergy benefits that should arise from its acquisitions of Pacific Brands and Champion Europe.

Hanesbrands’ 2017 EPS are expected to land between $1.93 and $2.03, a rise of 7% at the midpoint. In comparison, its earnings rose 11% YoY to $1.85 in 2016.

Peer comparison

Hanesbrands has better margins than its peers. It recorded a trailing-12-month operating margin of 12.4%, higher than VF Corporation’s (VFC) 11.9%, PVH Corporation’s (PVH) 7.3%, and Ralph Lauren’s (RL) -1.9%.

Investors looking for exposure to HBI can consider investing in the Consumer Discretionary Select Sector SPDR ETF (XLY), which invests 0.33% of its portfolio in HBI.

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