Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of sportswear specialist Gildan Activewear
So what: The stock has risen nicely in recent months on solid signs of a recovery, but a 56% quarterly profit drop on spiking cotton prices is forcing Mr. Market to sober up a bit. And given Gildan's already-debt-heavy balance sheet, the $88 million acquisition of Anvil -- which will be financed through its bank credit facility -- seems to be adding to the investor anxiety.
Now what: For the full year, management sees adjusted EPS of $1.30 on revenue of $1.95 billion, versus Wall Street's view of $1.31 and $1.91 billion. "We expect to end fiscal 2012 with strong earnings momentum, as we benefit from lower cotton costs and achieve better equilibrium between cotton cost and industry selling prices," CFO Laurence Sellyn said in a conference call with analysts. With the stock now down about 30% from its 52-week highs and trading at a reasonable forward P/E, today's pullback might be a good chance to buy into that turnaround talk.
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