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Gildan profit rises, but gloomy outlook sinks price

by Stan Heller, Consultant, VectorVest Canada
Dec 4, 2014

There seemed to be a lot of good news for Gildan Activewear (GIL) in its quarterly earnings release this morning. However, the company missed analyst’s expectations and delivered a gloomy outlook causing the stock to fall more than 13% at one point this morning. It’s since recovered somewhat, down ‘just’ 8% at time of writing.

If you’ve owned the stock for the last year, you’ve seen a nice 13% gain just about wiped out if you sold at the lows of the morning. If you bought the stock just ahead of today’s earnings release, you’re obviously disappointed. I don’t see anything in the charts that would have served as a warning for such a dramatic price decline. You might have been a bit concerned with the recent sideways to lower price action during a Confirmed Down (C/Dn) market call. Maybe a slight warning from shorter term trading signals on a daily chart such as the 3EMA/8EMA cross and MACD, still negative since the downward cross Nov 11 although it was trending up the last few days. On Balance Volume (OBV) was off its Nov 4 high, but was trending only slightly lower. RT is often the go-to indicator for signs of trouble ahead, but in this case it had just one down day and was still trading above 1.0 until today.

So, all in all, today’s sharp decline must be considered a surprise.

What we might expect. The stock will likely recover at least somewhat from the lows of the day once investors digest all the news and get over the initial disappointment. Recovery is likely to be tempered by a market that has turned decidedly bearish today. As is often the case, the worst thing to do is to sell right at the height of panic selling. Often there is a bounce off the lows such as we’ve seen already this morning, but it might be optimistic to expect Gildan to return to stellar price performance going forward unless the company revises its negative outlook.

Here’s is the good news reported by Thomson Reuters:

Canadian apparel maker Gildan Activewear’s (GIL) quarterly profit rose 26.8%, helped by higher sales of its printwear and branded apparel and its acquisition of Canadian hosiery company Doris Inc.

Net income rose to $122.7 million, or $1 per share, in the fourth quarter ended Oct. 5 from $96.8 million, or 79 cents per share, a year earlier.

Revenue rose 6.4 percent to $666 million.

Montreal-based Gildan also raised its dividend by 20 percent to 13 cents per share.

GIL Dec 4 2014


5 thoughts on “Gildan profit rises, but gloomy outlook sinks price

  1. A great quarter seems to mean very little in this market if guidance going forward isn’t pretty. I think people must be on hair-triggers given the weakness of our market overall and other recent examples of large and negative surprises.

    1. Thanks Barry. Certainly seems like a time to be cautious. We’ve had a nice rally off the bottom since the last confirmed down, but we seem to be stalling. Weak forecasts, misses by the banks and continuing weakness in commodities seems to be putting pressure on market.

  2. This all too frequent drop in price following good or even excellent quarterly results is a disturbing trend to this relatively new investor. It seems the market places more value on analyst’s predictions who, presumably, bring to the table varying degrees of thoroughness in arriving at their predictions. Clearly we must deal with the reality and try to find early warnings of such events but it seems we have the added complication that Gilden gapped down >13% at the open on Dec 4 and it is certainly not clear to me how, if at all, Joe (new) Investor can protect against that.

  3. Just spent some time looking at recent history on GIL and it looks like there might have been some early warnings on Dr. Star’s charts. After dropping from the “Fast Lane” to the “Centre Lane” from Oct 31 to Nov 6 / 7 it attained the “Fast Lane” again on Nov 17 but dropped quickly, all the way to the “Slow Lane” by Nov 21 – just 4 days.

    Also, DPO(20), the potential buy signal, had been declining steadily since the high on Oct 31 while DPO(9), the potential sell signal, went negative on Nov 12 and again on Nov 18.

    If only buy and sell decisions were as easy to get right as 20 / 20 hindsight on the historical data !!!!

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