Gildan Activewear Inc. has been one hot stock ever since the clothing maker released its quarterly results last week, surging more than 40 per cent in just three trading days. Now, UBS has raised its recommendation on Gildan to “buy” from “neutral” and raised its target price to $19 a share from $15.
“As we highlighted in our [second quarter for fiscal 2009] preview note, the results in the quarter were not as significant as the outlook, and the outlook was solid (all considered),” Vishal Shreedhar, an analyst at UBS, said in a note.
He pointed out that management estimates gross margins will rise in the second half of the company's fiscal year, to a range between 25 per cent and 26 per cent, which is up from 18.5 per cent in the first half of the year. The relatively poor margins in the first quarter were mostly due to higher commodity prices, production downtime and lower sales – issues that appear to have since stabilized or improved.
