Hanesbrands: Good Fit for Investors

10/08/2014 8:00 am EST


Leo Fasciocco

Investment Columnist and Publisher, Ticker Tape Digest

Our latest featured breakout candidate makes apparel, specifically innerwear, outerwear, and hosiery under the Hanes, Champion, Playtex, and Wonderbra brands, explains Leo Fasciocco, technician and editor of Ticker Tape Digest.

Hanesbrands (HBI) is a market leader and poised to show strong quarterly earnings. We suggest accumulation in anticipation of a breakout.

Over the past 12 months, the stock has appreciated 70% versus an 18% gain for the S&P 500 index (SPX). The stock has moved higher after the past four quarterly earnings reports.

The stock has since put down a 5-week flat base above its rising 50-day moving average line. That shows the stock remains in a solid uptrend.

The accumulation and distribution line is in an uptrend, showing good underlying buying in the stock. The breakout to a new high could bring in more buying.

For the third quarter, earnings should jump 40%. The Street expects net of $1.72 a share, up from $1.23 a year ago.

The highest estimate by analysts is at $1.78 a share. We see good chances for an upside earnings surprise. The past four quarters, the company topped the consensus by 21 cents a share, 18 cents, eight cents, and nine cents.

Looking ahead to the fourth quarter, net should climb 43% to $1.41 a share from 98 cents a year ago. That is a modest acceleration in quarterly earnings growth. That is bullish.

Going out to 2015, the Street is forecasting a modest 13% rise in net to $6.34 a share from the anticipated $5.61 for 2014.

Institutional sponsorship is excellent. A key fund buyer recently was the 5-star rated T. Rowe Price Mid Cap Growth Fund, which purchased 1.5 million shares, as a new position.  Also, the 4-star rated T. Rowe Price Growth Stock Fund was a recent buyer of 1.4 million shares.

We rate HBI a good intermediate-term play with potential to surprise on the upside due to its strong earnings outlook near-term.

Following the breakout over $110, we are targeting the stock for a move to $140 after a breakout. A protective stop can be placed near $103.

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