Hanesbrands' EPS Beats; Ups View - Analyst Blog
October 25 2012 - 10:45AM
Zacks
Hanesbrands Inc. (HBI) reported third quarter
2012 earnings per share of $1.11, up 31% from the prior-year
quarter, on strong sales. Earnings outpaced the Zacks Consensus
Estimate of $1.05 per share.
Revenues and Operating Profits
Quarterly revenues inched up 2.5% to $1.219 billion, driven by
sales growth in both Innerwear and Outerwear segments. This was
almost in line with the Zacks Consensus Estimate of $1.224
billion.
Gross profit went down 3.4% year over year to $399.9 million and
gross profit margin shrank 210 basis points to 32.8% during the
third quarter. The decline in profit resulted from inflation in
cotton prices. However, operating profit in the quarter climbed 8%
to $156.5 million, driven by lower selling, general and
administrative expenses. Operating profit margin expanded 60 basis
points to 12.8%.
Segment Details
Innerwear Segment: Net revenue at the Innerwear segment
increased 2.8% year on year to $574.3 million in the reported
quarter. The increase came on the back of decent performance of
men’s underwear and women’s panties. The company introduced new
products like Hanes ComfortBlend men’s underwear, Hanes Classics
slim fit and stretch premium underwear T-shirts, and Bali and
Barely There Smart Size seamless bras. Operating profit in the
segment went up 9.6% year on year to $96.8 million.
Outerwear segment: Outerwear segment sales climbed 5.2% from the
year-ago period to $41.0 million, driven by strong sales of
Champion activewear and Gear for Sports apparels, partially offset
by higher cotton prices. Outerwear segment’s operating profit
reported a decline of 4.2% to $46.3 million in the quarter.
International segment: Net sales at International segment
slipped 3.2% to $132.3 million in the quarter. The reason for
decline in revenue was foreign exchange headwinds. Excluding
currency, revenue in this segment increased 2% in the quarter.
Operating profit, however, jumped 18.8% to $17.6 million in this
segment.
Direct to Consumer segment: Direct to Consumer segment sales
went up 1.6% to $99.1 million and operating profit increased 17.5%
to $14.4 million in the quarter.
Other Financial Updates
The company exited the third quarter of 2012 with cash and cash
equivalents of $182.3 million compared with $29.7 million in the
previous quarter. Long-term debt was $1.5 billion compared with
$1.7 billion in the second quarter of 2012. Free cash flow was $287
million in the quarter. The company completed the retirement of
approximately $300 million of floating-rate bond debt as planned in
2012.
Guidance
For the fourth quarter, the company expects net sales in the
range of approximately $1.13 billion to $1.17 billion and earnings
per share (EPS) of $1.00 to $1.06. The company expects gross margin
percentage in the mid-30s and an operating profit margin of
slightly more than 13%. Interest expense is expected to be
approximately $33 million and the effective tax rate is expected to
be in the mid-teens.
For fiscal 2012, the company has upped the lower end of its
earnings guidance range to $2.54 – $2.60, compared with $2.50 -
$2.60 anticipated previously, thereby narrowing the range. The
company expects to increase its sales by approximately 2% compared
to previous guidance range of $4.52 billion –$4.57 billion. For
2012, the company now expects free cash flow to be toward the
higher end of the previous range of $400 million to $500 million.
The company’s near-term priority for the usage of free cash flow is
to reduce long-term debt and de-leverage its balance sheet.
Currently, Hanesbrands, which competes with Limited
Brands Inc. (LTD), carries a Zacks #3 Rank (short-term
Hold rating).
HANESBRANDS INC (HBI): Free Stock Analysis Report
LIMITED BRANDS (LTD): Free Stock Analysis Report
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