On Wednesday, Citi has increased the price target for Hanesbrands Inc. (NYSE:HBI), a leading apparel company, to $5.50 from $4.50. The firm has decided to maintain a Neutral rating on the stock. This adjustment comes in the wake of recent developments surrounding the potential sale of Hanesbrands' Champion brand.
The analyst from Citi stated that initial estimates placed the value of the Champion brand between $1.2 billion and $1.7 billion. However, they believed that a sale at approximately $1.4 billion would not significantly enhance shareholder value. Recent reports from Women's Wear Daily on April 2, 2024, suggested that the sale price might be closer to $1 billion, lower than the previously anticipated range.
Following the potential sale at the lower price, Citi's analysis suggests that Hanesbrands' remaining business, after debt repayment, would exhibit a leverage ratio of 3.2 times, based on year-end net debt to EBITDA projections for fiscal year 2024. Additionally, the company's stock would trade at 6.4 times its projected fiscal year 2024 enterprise value to EBITDA.
The Citi analyst expressed concern that a $1 billion sale price for Champion could be indicative of a distressed sale. They remarked that such a transaction does not appear to unlock significant value for Hanesbrands, especially considering the company's innerwear sales had been declining by approximately 3% annually before the pandemic and are currently operating on an elevated sales base compared to 2019.
InvestingPro Insights
In light of Citi's recent price target update for Hanesbrands Inc. (NYSE:HBI), InvestingPro data provides additional context for investors considering the company's stock. Hanesbrands currently has a market capitalization of approximately $1.8 billion and trades at a Price / Book ratio of 4.28 as of the last twelve months ending Q4 2023. Despite a decline in revenue by 9.58% during the same period, the company's gross profit margin remains strong at 34.51%.
From an InvestingPro Tips perspective, while analysts are predicting that Hanesbrands' net income is expected to grow this year, it's worth noting that four analysts have revised their earnings downwards for the upcoming period. Additionally, the stock has experienced significant volatility with a substantial price uptick over the last six months, yet it has taken a hit over the last week.
For investors seeking a deeper dive into Hanesbrands' financial health and stock performance, InvestingPro offers additional insights, including 12 more InvestingPro Tips that could guide investment decisions. To access these tips and take advantage of real-time analytics, use coupon code PRONEWS24 for an extra 10% off a yearly or biyearly Pro and Pro+ subscription at https://www.investing.com/pro/HBI.
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