Key Stats for Hanesbrands Inc.
Has the tide gone out? Is HBI swimming naked? Or is it pleasantly revealing?
| Ticker | HBI |
|---|---|
| Sector | Apparel & Accessories |
| Latest price | $19.32 |
| Value | $7,317M |
| Daily vol | $221M |
| Date | 07 February 2017 |
Useful Links
- Latest news from Google Finance and Yahoo Finance
- Latest results from SEC Edgar
- Website: http://www.hanes.com/
Description
Hanesbrands Inc. is a manufacturer and marketer of apparels. In their own words:
We primarily sell bras, panties, shapewear, hosiery, men’s underwear, children’s underwear, socks, T-shirts and other activewear in the Americas, Europe, Australia and Asia. In the United States, Hanes sells more units of intimate apparel, male underwear and children’s underwear than any other brand. Unlike most apparel companies, Hanesbrands primarily operates its own manufacturing facilities. More than 70 percent of the apparel units that we sell are manufactured in our own plants or those of dedicated contractors.
Their brands include Hanes, Champion, Maidenform, DIM, Playtex, Bali, JMS/Just My Size, Nur Die/Nur Der, L'eggs, Lovable, Wonderbra, Flexees, Lilyette and Gear for Sports.
In terms of sales split 43% was Innerwear & 26% Activewear in the US. The rest was predominantly International sales. And there's no surprises that Wal-mart is 20% of overall sales, 34% of US Innerwear and 28% of US Activewear. Target's also really important at 15% of overall sales.
Rather oddly , only 7% of overall sales were direct to consumer via their own 250 stores and their websites which clocked up a total of 40m visitors in 7m users on their email lists.
Recent financials
For a change I've added 9 years of numbers, not 5. And we can see there are down years in sales and earnings. Though overall HBI is able to clock up long-term growth organically and via acquisitions, top and bottom line.
| Metric | 2016A | 2015A | 2014A | 2013A | 2012A | 2011A | 2010A | 2009A | 2008A |
|---|---|---|---|---|---|---|---|---|---|
| Revenue | $6.0bn | $5.7bn | $5.3bn | $4.6bn | $4.5bn | $4.3bn | $3.9bn | $4.3bn | $4.5bn |
| EPS | $1.40 | $1.06 | $0.99 | $0.81 | $0.41 | $0.54 | $0.14 | $0.34 | $.33 |
| DPS | $0.44 | $0.40 | $0.30 | $0.15 | $0.00 | $0.00 | $0.00 | $0.00 |
We'll get to the debt levels in a moment, but they've been paying dividends, and increasing them annually for just 4 years now. Now the recent results disappointed the market, both top and bottom line.
But that aside, management thinks there's reasonable growth in 2017.
Competition
The 10-K is only a few days old...
Our businesses face competition today from other large corporations and foreign manufacturers. Fruit of the Loom, Inc., a subsidiary of Berkshire Hathaway Inc., competes with us across most of our segments through its own offerings and those of its Russell Corporation and Vanity Fair Intimates offerings. Other competitors in our Innerwear segment include Limited Brands, Inc.’s Victoria’s Secret brand and Jockey International, Inc. Other competitors in our Activewear segment include various private label and controlled brands sold by many of our customers, as well as Gildan Activewear, Inc. and Gap Inc. Large European intimate apparel distributors such as Triumph International and Calzedonia S.p.A Group, as well as international activewear retailers such as Nike, Adidas, Puma, Under Armour and Converse, compete with us in our International segment.
Margins aren't best in class, which goes to other Innerwear players like LB and GIL, but they are respectable compared to the rest of the sector. On the returns side, their debt fuelled acquisitions pay well to generating high returns.
| Companies | Latest Sales | Operating Profit | Return on Equity |
|---|---|---|---|
| Hanesbrands Inc. | $6,028M | 14% | 43% |
| L Brands Inc | $12,480M | 21% | N/A |
| Gildan Activewear Inc (USA) | $2,541M | 21% | N/A |
| Gap Inc | $15,472M | 12% | 25% |
| Nike Inc | $33,517M | 15% | 30% |
| adidas AG | €16,915M | 9% | 12% |
| Under Armour Inc | $4,828M | 12% | 11% |
| VF Corp | $12,111M | 17% | 24% |
Cash / Debt?
And thinking of that debt...Hanesbrands Inc. has $3,282M of net debt. That is 3.8x it's latest operating profit. I am uncomfortable with that sort of debt level, unless you are an electric utility, of course.
Though it appears that management has been able to run a highly leveraged business for years & still negotiate with the bankers the rights to pay out dividends. Must be good negotiators with Wall Street types!
Wall Street thinks?
The professionals on Wall Street have a $27.54 for Hanesbrands Inc. and their recommendation to clients is Buy. That implies an upside of 43% to their target. Now that price target has been trashed recently...down from $33 as recently as last week.
So despite missing earnings, twice in the last year, four times in the last 2 years. Wall Street's still not thrown in the towel! That's despite the forecast PE ratio trending down from 21x to 10x.
Valuation
It's hard to find a cheaper Apparel stock. Though maybe that indicates skepticism on the 2017 forecasts. Already they've been trimmed 6%. But they still seem lofty at $2.01 given 2016 was just $1.40. Though I suspect I am comparing Adjusted to Reported.
| View Peers | Valuation | Forecast PE | Long-term Growth | Dividend Yield | FCF Yield |
|---|---|---|---|---|---|
| HBI | $7,317M | 10x | 10% | 3% | 11% |
| LB | $16,914M | 16x | 11% | 7% | 13% |
| GIL | N/A | 16x | 13% | 1% | 0% |
| GPS | $9,166M | 12x | 5% | 4% | 18% |
| NKE | $87,356M | 23x | 12% | 1% | 6% |
| ADSGN.DE | €30,085M | 29x | 24% | 1% | 5% |
| UA | $8,518M | 46x | 21% | 0% | 0% |
| VFC | $20,421M | 16x | 8% | 3% | 10% |
But even if they had a "pedestrial" 1.55 in EPS in 2015 the stock would still be reasonable at 12x.
Dividends
Hanesbrands Inc. is forecast to pay a dividend of $0.56 per share, compared with a historic dividend of $0.44 per share. That is a 27% growth. The forecast dividend of $0.56 compares to a forecast EPS of $2.01.
And they forecast a buyback of up to $300m in the next year.
Catalysts
In the last 3 months the stock price has moved by -20% that compares with a change in the earnings forecasts of 5%. That's against a backdrop of sales up 5% in the last year, and adjusted earnings up 25%. Though fair to say analysts and investors were disappointed by the 4th quarter and the guidance for 2017.
On the management team's latest call with Wall Street brokers there was a lot of discussion of headwinds. Talked of reasonable growth overall and strong growth internationally. Even so, the market was not impressed.
With all that negativity, HBI is starting to look cheap. Sure it could get cheaper, especially if the earnings forecasts for 2017 are too high. But isn't that largely price in already?
Like the GAP, they've been thro' a lot of pain recently. But in contrast, $GPS has seen its forecasts and valuation hammered. In HBI's case sales and earnings have been doing fine.
So if you are a value investor, are you tempted to start nibbling?
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Disclosure: I have no position in any of the stocks mentioned. However I may initiate a position within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. Reddit, moderators, and the author do not advise making investment decisions based on discussion in these posts. Analysis is not subject to validation and users take action at their own risk.
Author notes: u/shane_stockflare works at a financial website, Stockflare, and is a Chartered Financial Analyst.
Submitted February 07, 2017 at 04:53PM by shane_stockflare http://ift.tt/2kEYaVp
