Why Hanesbrands Inc. Stock Dropped Today

By Markets Fool.com

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

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What: Shares of clothing manufacturer and marketer Hanesbrands fell as much as 13.6% in early Friday trading. In a second-quarter report published on Thursday night Hanes posted soft sales and disappointing full-year guidance.

So what: Analysts were expecting second-quarter earnings or $0.50 per share on roughly $1.56 billion in sales. The company's adjusted earnings landed exactly in line with Wall Street targets, but revenues fell short at $1.52 billion.

Looking ahead, management now expects sales totaling less than $5.9 billion in 2015, down roughly $50 million from the guidance provided three months ago. On the bottom line, earnings guidance held steady with a midpoint value of roughly $1.64 per share. Both of these projections sit slightly below the current analyst view.

Hanes logo

Image source: Hanesbrands.

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Now what: Hanes ran into heavy currency-exchange headwinds. As reported, sales rose 13% year-over-year. Adjusted for currency effects, sales increased 15%. That's more than enough to explain this quarter's revenue miss. Management also explained that currency trends were key drivers behind the lower full-year guidance.

On the other hand, profit margins are on the rise thanks to a well-oiled supply chain and the successful integration of several tuck-in acquisitions. On the whole, Hanes actually raised its full-year operating profit guidance by a modest 0.2%.

Including today's drastic plunge, Hanes shares are still trading 21% higher year-over-year and 9% higher in 2015. In both cases, you're looking at a solid market-beater. Frankly, the price drop looks like a misguided overreaction or possibly some hasty profit-taking. This business is still going places.

The article Why Hanesbrands Inc. Stock Dropped Today originally appeared on Fool.com.

Anders Bylund has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.