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