It seems like forever since we started to see earnings pour in. And yet, here we are, continuing to follow along as companies like Gildan Activewear (TSX: GIL) offer up earnings. Yet if you thought that you didn’t have to pay attention anymore, you may have missed out on an earnings jump.
Shares of Gildan stock jumped after the retail company announced earnings, including a 10% dividend increase! But as with any stock, it’s important to look behind the curtain. So here are some points to consider before buying Gildan stock on the TSX today.
What happened
First off, let’s look at what happened to make the shares of Gildan stock jump in the first place. As mentioned, perhaps the most obvious reason was the 10% dividend increase. Yet the company also managed to slightly beat analyst forecasts. Something thought not possible given the ongoing inflation issues.
The Montreal T-shirt and fleece maker brought in profit of US$0.89 per share for the last quarter. Sales also hit US$783 million, with adjusted net profit coming in at US$0.75 per share. This was higher than the expected US$0.73 per share, with revenue of US$761 million.
“Outstanding operational execution by our highly skilled team of employees across our global footprint delivered strong Q4 results,” said new chief executive Vince Tyra in a statement. “I see a bright future ahead, where we can leverage our strengths and continue to enhance value for all stakeholders.”
Yes, we said “new”
The new CEO has a lot to prove as the company’s new head. Some investors may not be so sure about his leadership, but certainly a dividend increase at least helped in part. Gildan stock announced a quarterly dividend of US$0.205 per share.
The new CEO came as the market was in shock after the dismissal of 40-year veteran, and 20-year CEO, Glenn Chamandy. Tyra is now on board as a former executive at Fruit of the Loom. It comes after an intense power struggle on Gildan’s board of directors, with the board stating it had every justification to fire Chamandy.
The fear from shareholders opposed to the idea was that Tyra wasn’t up to the task. After all, executive doesn’t translate to CEO. And a 20-year track record cannot be ignored. Yet in the end, Tyra is here, and Chamandy doesn’t look as though he will be returning.
Looking ahead
The question now is to ask whether the future will be brighter for Gildan stock or not under new leadership. After all, as we’ve seen, leadership matters. Chamandy’s family founded Gildan, so he certainly had an interest in seeing it do well.
Not that Tyra doesn’t, but nepotism certainly has its benefits in this case. Even so, Tyra now believes that more growth is on the way. The company should hit their forecasted targets for the year. Gildan stock should continue to see market share gains in its product categories. What’s more, it expects to boost adjusted earnings per share to US$3.07 from US$2.92.
In my view, Gildan stock is a “wait and see” company at this point. The market is still volatile, even as we see shares rise. I would advise to wait for three more quarters of positive results before investing under new leadership. Then, you could certainly be in favour of that 10% increase in the dividend.
