Hanesbrands Earnings: Meeting Expectations Mildly Positive Considering Tough Market; Shares Cheap

Although it reported a small net loss, narrow-moat Hanesbrands’ 2023 first-quarter results were in line with its outlook and our estimates. Moreover, the company reiterated its full-year guidance, including a 2% sales decline (at the midpoint) and adjusted EPS of $0.31-$0.42. Hanes’ shares edged up by a mid-single-digit percentage on this news, likely because expectations were extremely low. As our estimates align with the current outlook, we do not expect to make any material change to our $20 per share fair value estimate and continue to view Hanes’ shares as very undervalued. While the company lacks sales momentum and is contending with slowing consumer demand, we anticipate its profit margins will improve markedly by the end of 2023 due to lower input costs, putting it on track to return to operating margins of around 13% within about two years, up from just 9% (adjusted) in 2022.