Hanesbrands Earnings: A Lower Near-Term Outlook but Some Signs of Progress; Shares Undervalued

Narrow-moat Hanesbrands' second-quarter results were in line with our expectations, but it guided to disappointing profit recovery in the second half of the year due to slow sales of Champion and tough market conditions in Australia. Hanes now expects full-year adjusted EPS of $0.16-$0.30, down from its prior range of $0.31-$0.42. However, as our EPS estimate of $0.31 was at the bottom of its prior range and we do not expect to adjust our long-term estimates (including 3% annual sales growth and 13% operating margins), we expect to make only a low-single-digit percentage reduction to our $20 per share fair value estimate.