Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Hanesbrands Inc. (HBI), Maidenform Brands, Inc. (MFB): Investing in Underwear Could Help Your Portfolio

Hanesbrands Inc. (NYSE:HBIowns a number of famous brands and sells its products directly to customers through a chain of more than 200 stores, as well as online. The stock has done well this year, rising almost 70% compared to about a 16% uptick in the S&P 500 index, but it still looks cheap with a trailing P/E of under 17x.

HBI Chart

Moreover, given the company’s solid strategies and execution, the stock might appreciate further, as evidenced by recently-reported quarterly results. Revenue increased by 2% to $1.2 billion primarily due to increased sales in the inner-wear segment.

Hanesbrands Inc. (NYSE:HBI)

The success of Hanesbrands Inc. (NYSE:HBI)’s “Innovate to Elevate” strategy led to a 51% increase in operating profit to $181.4 million, as compared to $119.9 million in the year-ago quarter. In addition, lower cotton costs also helped. As a result, EPS advanced 78% from the year-ago quarter to $1.19 and beat consensus estimates of $0.94.

Another acquisition and a good strategy

Hanesbrands Inc. (NYSE:HBI) has always eyed mergers and acquisitions for growth. Years ago, it purchased Gear For Sports, and that worked out well for company. It recently acquired Maidenform Brands, Inc. (NYSE:MFB), which will add brands like Maidenform, Flexees, and Self Expressions to its already comprehensive portfolio. Hanesbrands Inc. (NYSE:HBI) did well in the inner-wear segment in the reported quarter, and with this acquisition it is expects to keep the momentum intact.

Maidenform Brands, Inc. (NYSE:MFB) delivered a profit but missed consensus estimates on both earnings and revenue in the most recent quarter. Also, analysts have a neutral outlook as far as next quarter’s performance is concerned. Maidenform Brands, Inc. (NYSE:MFB) struggled as a result of cheaper competition in the women’s underwear business. The company had to resort to discounts and heavy advertising to compete. It is expected, however, that the synergies as a result of the acquisition by Hanesbrands Inc. (NYSE:HBI) will lead to lower costs and contribute to earnings.

Hanesbrands Inc. (NYSE:HBI) ranks second in terms of underwear market share, at 14.3% of the market. Maidenform Brands, Inc. (NYSE:MFB) ranks fifth with 2.5%. The combined company will be one of the leading underwear companies. As a result of the acquisition, Hanesbrands gets a big portfolio of brands, which implies more leverage and pricing power with retailers ranging from Wal-Mart to Macy’s.

It also expects that the adjusted annual revenue will exceed $5 billion within three years, thereby producing $0.60 per share in earnings going forward. This will also benefit Hanesbrands with a larger market share within the shape-wear industry.