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Why Hanesbrands Stock Climbed 12% in September

By John Ballard - Oct 7, 2019 at 4:19PM

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Despite trade tensions in recent months, investors can't resist a bargain.

What happened

Shares of Hanesbrands (HBI -1.74%) gained 12.2% last month, according to data provided by S&P Global Market Intelligence. Despite delivering a solid quarterly earnings results at the start of August, the stock has been quite volatile over the last two months.

The share price fell 15% in August as the trade war between the U.S. and China escalated. New tariffs on $125 billion worth of Chinese imports, including softline retail goods, went into effect at the start of September. A report from Credit Suisse included Hanesbrands as one of 16 retailers that could be impacted by the new tariffs. 

A store with the Champion logo in neon blue and red displayed on a wall.

Image source: 

However, just because there is bad news doesn't mean stocks can't move higher. Hanesbrands stock is cheap, trading for only 8.4 times next year's earnings estimates and offers a high dividend yield of 4.12%. Investors clearly decided to take advantage of a bargain stock, sending shares up for the month of September.

So what

The Credit Suisse report says that only 2% of the company's costs of goods sold are imported from China. That's hardly anything to worry about. In fact, management hasn't even discussed tariffs on recent conference calls. The only mention of China has involved management's plans to grow the Champion brand, which continues to blaze a trail of growth in the athleisure market. 

Now what

In the most recent quarter, Hanesbrands reported revenue, operating profit, and earnings per share at the high end of guidance. That has CEO Gerald Evans optimistic about the company's momentum:

We believe we're on track to achieve the midpoint of our guidance or higher, given our first-half momentum and our second-half visibility, including Champion bookings growth, our international strength, and additional innovation launches in innerwear.

For what it's worth, analysts currently expect Hanesbrands to post revenue and earnings growth of 2.3% for 2019. If the company can sustain top- and bottom-line growth, the stock could have more room to run over the next year. 

John Ballard owns shares of Hanesbrands. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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