NEW YORK (TheStreet) -- HanesBrands (HBI) - Get Report shares are up 2.3% to $125.12 in trading on Wednesday after the apparel maker announced that it has entered into a definitive agreement to purchase fellow clothing maker Knights Apparel for $200 million after the closing bell yesterday.
The company purchased Knights Apparel, a collegiate logo apparel company, from private equity firm Merit Capital Partners in a deal that HanesBrands said that it expects to add 10 cents per share to its pre-stock-split earnings this year.
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The company announced last month that it intends to split its stock 4-1 on March 3 while also upping its quarterly dividend payout by a third, to 40 cents per share from 30 cents per share.
Knights Apparel is expected to generate $180 million in 2015 and HanesBrands said that it expects its licensed and graphic apparel sales to climb to $450 million a year following the acquisition.
TheStreet Ratings team rates HANESBRANDS INC as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:
"We rate HANESBRANDS INC (HBI) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity, solid stock price performance, impressive record of earnings per share growth and compelling growth in net income. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- HBI's revenue growth has slightly outpaced the industry average of 17.7%. Since the same quarter one year prior, revenues rose by 18.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 175.00% and other important driving factors, this stock has surged by 61.87% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, HBI should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- HANESBRANDS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, HANESBRANDS INC increased its bottom line by earning $3.96 versus $3.25 in the prior year. This year, the market expects an improvement in earnings ($6.45 versus $3.96).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Textiles, Apparel & Luxury Goods industry. The net income increased by 177.2% when compared to the same quarter one year prior, rising from $32.27 million to $89.44 million.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Textiles, Apparel & Luxury Goods industry and the overall market, HANESBRANDS INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- You can view the full analysis from the report here: HBI Ratings Report