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Will Hanesbrands' (HBI) Q2 Earnings Surpass Estimates? - Analyst Blog

Hanesbrands Inc.HBI is set to report second-quarter 2015 results on Jul 30, after the market closes. Last quarter, it posted in-line results. The company has delivered positive earnings surprises in two of the last four quarters with an average surprise of 3.99%. The company posted in-line results in the other two quarters

Let us see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Reynolds is likely to beat earnings because it has the right combination of two key ingredients:

Zacks ESP : Earnings ESP , which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +4.00%. This is meaningful and a leading indicator of a likely earnings surprise.

Zacks Rank: Hanesbrands carries a Zacks Rank #2 (Buy). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 and 3 (Hold) have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

The combination of Hanesbrands' Zacks Rank #2 and +4.00% ESP makes us confident about an earnings beat.

What is Driving the Better-than-Expected Earnings?

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 margins in the second quarter as well.

Further, acquisitions are also driving sales for the sports apparel company. Management is optimistic about the collegiate logo apparel seller, Knights Apparel acquired by Hanesbrands in the first quarter. It even raised its fiscal earnings outlook based on accretions from the takeover. Moreover, the DB Apparel acquisition which has been integrated with the company's brand portfolio attributed significantly to first quarter sales. We expect the trend to continue in the second quarter as well.

Moreover, signs of economic improvement, especially in the labor market, indicate that a rebound in consumer spending is in the offing. Better job prospects, improved business momentum and renewed optimism have led to a slow but steady recovery in the U.S. economy. The apparel sector in particular is highly vulnerable to economic shocks as the purchase of clothing items is largely optional in comparison to other discretionary consumer goods. As a result, the economic improvement over the past few months is expected to boost results in the to-be-reported quarter.

Moreover, acquisitions are driving sales for the sports apparel company. The company acquired collegiate logo apparel seller, Knights Apparel in the first quarter which is expected to boost sales this year.

Other Stocks to Consider

Here are some other companies that you may consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Guess' Inc. GES , with an Earnings ESP of +6.67% and a Zacks Rank #1.

Coach Inc. COH , with an Earnings ESP of +3.45% and a Zacks Rank #3.

Abercrombie & Fitch Co. ANF , with an Earnings ESP of +62.50% and a Zacks Rank #3.

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COACH INC (COH): Free Stock Analysis Report

ABERCROMBIE (ANF): Free Stock Analysis Report

HANESBRANDS INC (HBI): Free Stock Analysis Report

GUESS INC (GES): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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