What happened

Shares of Gildan Activewear (GIL -1.74%) increased 10.2% last month, according to data provided by S&P Global Market Intelligence, after the company posted a solid third-quarter earnings report.

So what

Gildan Activewear has benefited from rising demand for activewear in recent years, and the most recent quarter continued to show solid demand. Revenue grew 5.8% year over year to $754 million. On the bottom line, non-GAAP earnings per share grew by 7.5% to reach $0.57. This is consistent with management's long-term goal to drive mid-single-digit revenue growth and high-single-digit to low-double-digit earnings growth.

Smiling men and women wearing activewear are standing against a grey wall.


The quarter would have been even better if not for the disruption caused by Hurricane Florence, which cut about $30 million off of revenue. Adjusting for that, revenue would have grown 9.5% year over year.

The activewear category, which made up 81% of total revenue in the quarter, saw sales increase 12.1%, but that growth was partly offset by a 16.6% decline in hosiery and underwear. Gildan continues to see strong demand across fast-growing areas, such as fashion basics, international markets, global lifestyle brands, and e-commerce. Companies have been shifting more investment to private-label brands, which has played right into the hands of Gildan.

Now what

Looking ahead to 2019, the current trends benefiting Gildan should continue. Wall Street analysts currently expect revenue to grow about 5% next year and adjusted earnings per share to increase to $2.09 per share, representing low-double-digit growth over 2018.

Gildan appears to have a big opportunity to expand internationally: Revenue in markets other than the U.S. and Canada grew a robust 28% year over year in the third quarter. International revenue made up just 10.8% of total revenue in the quarter. Management also saw double-digit growth in e-commerce.

Over the last 10 years, Gildan stock has climbed 377%, soundly beating the broader market. The stock has been flat over the last three years and trades at a modest 16 times next year's earnings estimates. If Gildan delivers on its outlook next year, the stock should head higher from here.