A month has gone by since the last earnings report for HanesBrands (HBI Quick QuoteHBI - Free Report) . Shares have lost about 5.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is HanesBrands due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Hanesbrands Q3 Earnings In Line With Estimates, Sales Fall

Hanesbrands reported third-quarter 2022 adjusted income from continuing operations of 29 cents a share, in line with the Zacks Consensus Estimate of 29 cents per share. The metric declined from 53 cents reported in the year-ago quarter.

Net sales from continuing operations declined 7% to $1,670.7 million and missed the Zacks Consensus Estimate of $1,753.4 million. The metric includes a $59-million negative impact from foreign exchange rates. On a constant-currency (cc) basis, net sales fell 3%. The downside was caused by a macro-driven slowdown in consumer spending across the United States and certain Asian markets. In addition, soft orders due to U.S. retailers tightly managing overall inventory levels were a downside. That said, innerwear growth across Australia and the Other Americas and Champion growth in Europe offered some respite. Global Champion brand sales fell 14%, with the same declines across the United States and internationally.

Adjusted gross profit came in at $576 million. Adjusted gross margin was 34.5%, down almost 460 basis points (bps) due to impacts of commodity and ocean freight inflation and manufacturing time-out expenses. These were somewhat offset by pricing actions, lower use of air freight and savings from the Full Potential initiative. Adjusted operating profit came in at $168 million, down $96 million from the third quarter of 2021. Adjusted operating margin of 10% contracted nearly 470 bps.

Innerwear: Segment sales fell 11% year over year. The downside was a result of macroeconomic pressures, which dented consumer spending and the impact of retailer actions to manage inventory. That said, benefits from the first-quarter price rises and retail space gains offered some respite. Segmental operating margin stood at 16%, down 505 bps.

Activewear: Sales were in line with the year-ago quarter’s level. The company saw continued growth in the collegiate channel as well as impressive growth across the printwear channel for Champion and Hanes brands. These factors were offset by softness in the other channels owing to reduced point-of-sale trends and increased Activewear inventory levels. Segmental operating margin of 11.6% contracted nearly 490 bps.

International: Revenues in the International business declined 6% year over year including $59 million of unfavorable currency headwinds .At cc, International sales rose 5%, fueled by Champion growth across Europe and innerwear growth in Australia and the Other Americas. However, Champion declines in some Asian markets were a headwind. Segmental operating margin stood at 13.9%, down nearly 220 bps.

Other Financial Details & Guidance

The  company ended the quarter with cash and cash equivalents of $253.1 million, long-term debt of $3,655.9 million and total stockholders’ equity of $674.9 million. It had roughly $610 million of available capacity under its credit facility at the end of the quarter. For the quarter that ended Oct 1, 2022, the company used $50.6 million as net cash from operating activities.

Inventory came in at $2.14 billion, up 31% year over year. The company declared a cash dividend of 15 cents per share, payable on Dec 13, 2022, to shareholders of record as on Nov 22. The company has approximately $575 million remaining under its current repurchase authorization.

For 2022, net sales from continuing operations are now anticipated to be $6.16-$6.21 billion, which includes an anticipated currency headwind of nearly $196 million. The midpoint of the guidance suggests a 9% year-over-year net sales decline on a reported basis and a nearly 6% fall at cc. Earlier, 2022 net sales from continuing operations were anticipated to be $6.45-$6.55 billion, suggesting a 4% year-over-year net sales decline on a reported basis and a nearly 2% fall at cc at the midpoint.

For 2022, adjusted operating profit from continuing operations is likely to be in the $567-$597 million range for the year, including a currency headwind expectation of roughly $26 million. Earlier, management expected the metric in the $630-$680 million range, including a currency headwind of roughly $22 million. In 2022, Hanesbrands expects to incur charges associated with the Full Potential plan of nearly $55 million. Adjusted earnings per share (EPS) from continuing operations is envisioned to be in the 95 cents to $1.02 range during 2022, down from the previous guidance of $1.11-$1.23.

For fourth-quarter 2022, net sales from continuing operations are expected to be $1.40- $1.45 billion, including a projected headwind of nearly $68 million from currency rates. At the midpoint, the guidance reflects nearly 15% year-over-year net sales growth on a cc basis or down 19% on a reported basis. Adjusted operating profit from continuing operations is expected in the range of $100- $70 million, including a projected headwind of nearly $9 million from currency rates. Adjusted EPS from continuing operations are envisioned in the 4-11 cents range for the fourth quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -72.22% due to these changes.

VGM Scores

Currently, HanesBrands has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise HanesBrands has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

HanesBrands is part of the Zacks Textile - Apparel industry. Over the past month, Columbia Sportswear (COLM Quick QuoteCOLM - Free Report) , a stock from the same industry, has gained 16.3%. The company reported its results for the quarter ended September 2022 more than a month ago.

Columbia Sportswear reported revenues of $955.06 million in the last reported quarter, representing a year-over-year change of +18.7%. EPS of $1.80 for the same period compares with $1.52 a year ago.

For the current quarter, Columbia Sportswear is expected to post earnings of $2.30 per share, indicating a change of -3.8% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Columbia Sportswear. Also, the stock has a VGM Score of D.