Hanesbrands Inc.HBI is set to report third-quarter 2015 results on Oct 28, after the market closes. Last quarter, the company posted in-line earnings. The company has delivered in-line earnings in three out of the trailing four quarters while outperforming once with an average positive surprise of 0.70%.
Let's see how things are shaping up for this announcement.
Factors to Consider
Hanesbrands has been reporting decent earnings over the past few years backed by the strategic initiative - Innovate-to-Elevate. The high-margin products that the strategy focuses on should expand third-quarter margins as well.
Further, acquisitions are driving sales for the sports apparel company. Management is optimistic about the collegiate logo apparel seller Knights Apparel, acquired in the first quarter. In fact, Hanesbrands raised the full-year earnings outlook based on accretions from the takeover. Moreover, the DBApparel acquisition attributed significantly to the second-quarter sales and we expect the trend to continue in the third quarter as well.
However, currency has been hurting the top line for the past few quarters and it is likely to persist in the third quarter as well.
Our proven model does not conclusively show that Hanesbrands is likely to beat earnings this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to surpass earnings estimate. However, that is not the case here due to the following factors:
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 45 cents. Hence, the difference is 0.00%.
Zacks Rank: Hanesbrands' Zacks Rank #3 when combined with a 0.00% ESP makes surprise prediction difficult.
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 momentum.
Stocks to Consider
Here are some companies consumer discretionary stocks that you may consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Carnival Corp. CCL , with an Earnings ESP of +2.50% and a Zacks Rank #2.
Michael Kors Holdings Ltd. KORS , with an Earnings ESP of +3.37% and a Zacks Rank #3.
Ralph Lauren Corp. RL , with an Earnings ESP of +0.58% and a Zacks Rank #3.
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