On Wednesday, CFRA adjusted its stance on Gildan Activewear (TSX:GIL) (NYSE:GIL:CN) (NYSE: GIL), raising the stock rating from Buy to Hold, while also revising the price target downward to Cdn$50.00 from the previous Cdn$59.00. The firm justified the new price target with a multiple of 12.3 times its 2024 earnings per share (EPS) estimate, which is slightly below Gildan's three-year average forward price-to-earnings (P/E) multiple of 12.7x.
The revision follows Gildan's financial performance in the fourth quarter, where the company reported a normalized EPS of USD0.75 compared to USD0.65 in the same period the previous year. This result was slightly ahead of consensus estimates by USD0.02. Revenue for the quarter stood at USD783 million, surpassing estimates by USD22 million and showing an increase from USD720 million year-over-year.
Gildan's growth in the fourth quarter was sector-specific, with Activewear sales rising by 8% year-over-year, and the hosiery and underwear segment seeing an 11% increase, both driven by higher volumes. Geographically, the U.S. market experienced a 12% year-over-year growth, Canada surged by 31%, while International sales saw a decline of 24%.
The company also reported an improvement in its adjusted gross margin, which expanded by 110 basis points year-over-year to 30.2%. This increase was attributed to lower raw material costs, although it was partially offset by reduced selling prices.
Looking forward, Gildan anticipates a low-single-digit to flat revenue performance in 2024, with projected EPS ranging between USD2.92 and USD3.06. This guidance takes into account the impact of the expiration of its Under Armour (NYSE:UA) sock licensing agreement. The lowered expectations for future growth have influenced CFRA's revised opinion and price target for Gildan's stock.
InvestingPro Insights
In light of CFRA's recent rating adjustment for Gildan Activewear (GIL:CN) (NYSE: GIL), it's beneficial to consider current metrics and expert insights from InvestingPro to better understand the company's financial landscape. With a market capitalization of $5.94 billion and a P/E ratio that stands at 13.36, Gildan presents a valuation that is close to the industry average. When looking at the adjusted P/E ratio for the last twelve months as of Q3 2023, it's slightly higher at 13.49, reflecting a stable earnings outlook.
InvestingPro Tips reveal that Gildan has demonstrated a commitment to shareholder returns, having raised its dividend for three consecutive years and maintained dividend payments for 13 consecutive years. This is underscored by a dividend yield of 2.2% as of the latest data, with a notable dividend growth of 10.06% in the same period. These factors could be particularly attractive to income-focused investors.
However, it is important to note that three analysts have revised their earnings expectations downwards for the upcoming period, which may suggest some caution is warranted. Despite this, analysts predict the company will be profitable this year, and it has been profitable over the last twelve months.
For investors looking for a deeper dive into Gildan's financial health, InvestingPro offers additional insights. Gildan operates with a moderate level of debt and its liquid assets exceed short-term obligations, which could be reassuring for those concerned about the company's financial stability in the near term. Moreover, the stock's price movements have been quite volatile, which might appeal to traders seeking short-term opportunities.
For those interested in further analysis and tips, InvestingPro provides additional insights on Gildan Activewear. By visiting https://www.investing.com/pro/GIL and using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are a total of 8 InvestingPro Tips available for Gildan, offering a comprehensive view of the company's prospects and performance.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.