Gildan Is D.A. Davidson's Top Active Lifestyle Stock

In a recent report, D.A. Davidson analysts focused on the outlook for the active lifestyle industry.

Basic apparel earnings season kicks off this week when Hanesbrands Inc. (NYSE: HBI) reports earnings on January 29, and analysts gave their take on Hanesbrands and Gildan Activewear Inc (USA) (NYSE: GIL).

Favorable Q4 Environment

Analysts believe that the economic conditions for retailers in 4Q14 were favorable and explain that the overall basic retail environment was solid for the quarter.

Analysts believe that both Hanesbrands and Gildan had opportunity to gain market share in the quarter. Analysts see upside earnings potential to consensus estimates for both companies.

2015 Outlook

Analysts noted that falling cotton prices will likely have a material impact on costs in the second half of 2015.

They believe that low cotton prices could lead to margin growth opportunities but could also provide retailers with opportunities to drop prices in an attempt to gain market share.

Growth Ahead For Gildan

Analysts see significant growth potential and a strong track record of performance for Gildan and believe that the stock’s current share price doesn’t fully reflect the company’s value.

Davidson analysts are slightly below consensus with their revenue projection of $400.2 million for Q4, but predicts a slightly smaller earnings loss than consensus at ($0.30) per share. Davidson rates Gildan a Buy and has a $68 price target for the stock.

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Limited Upside For Hanesbrands

Analysts are projecting Q4 earnings of $1.41 per share on $1.561 billion in revenue, nearly in-line with consensus estimates. Davidson’s price target for Hanesbrands stock of $118 is based on a 17x multiple on their 2016 earnings estimates.

With the stock currently trading around $112, analysts see limited upside to the stock from current levels and assign Hanesbrands a rating of Neutral.