Analyst Note| David Swartz |
Narrow-moat Hanesbrands reported results for the first quarter of 2021 that outperformed our estimates. It also held its first analyst event in three years to outline its “Full Potential” plan to drive growth and operating margin improvement. We view the key financial goals of this plan, including $1.2 billion in incremental revenue and an operating margin above 14% by 2024, as achievable. Nonetheless, Hanes’ shares dropped by a low-double-digit percentage on the news, possibly because investors anticipated higher near- and long-term sales and profit guidance. We expect to raise our $24 fair value estimate by a mid-single-digit percentage, leaving the shares as undervalued.