Hanesbrands Inc. (HBI) is set to report fourth-quarter 2014 results on Jan 29. Last quarter, it posted a positive earnings surprise of 0.58%. The company has also delivered positive surprise the all the previous four quarters. Let us see how things are shaping up for this announcement.
Factors to Consider
Hanesbrands has been reporting decent earnings for the past few years backed by the strategic initiative — Innovate-to-Elevate. Hanesbrands revised its earnings and sales guidance for fiscal 2014 upwards on the back of lower cotton costs and the Innovate-to-Elevate strategy. The high-margin products that the strategy focuses on as well as the lower cotton costs should expand margins.in the upcoming quarter.
Moreover the recent acquisitions of Maidenform Inc. and DB Apparel are also expected to boost sales in the fourth quarter.
However, the company reported lower-than-expected sales in the third quarter due to unfavorable currency. The currency headwinds are expected to continue in the fourth quarter as well
Earnings Whispers
Our proven model does not conclusively show that Hanesbrands is likely to beat earnings this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 to surpass earnings estimate. However, that is not the case here due to the following factors:
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.45. Hence, the difference is 0.00%.
Zacks Rank: Hanesbrands’ Zacks Rank #3 (Hold) when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here are some companies that you may consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Bebe Stores Inc. (BEBE), with an Earnings ESP of +50.00% and a Zacks Rank #1 (Strong Buy).
Reynolds American Inc. (RAI), with an Earnings ESP of +1.15% and a Zacks Rank #2 (Buy).
Tyson Foods Inc. (TSN), with an Earnings ESP of +2.78% and a Zacks Rank #3.
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