Despite high inflation, logistic disruptions, and omicron coronavirus variant-related concerns, the U.S. manufacturing industry as a whole has witnessed impressive growth lately. According to the Institute for Supply Management, the index of manufacturing activity rose to 61.1 in November. Increasing consumer spending has helped the apparel manufacturing industry grow.

According to the Commerce Department data, U.S. consumer spending rose 0.6% in November. Consumer sentiment also remained strong in December. The final reading of the consumer sentiment index compiled by the University of Michigan came in at 70.6 for December, up from 67.4 in November. According to Statista, revenue in the apparel market is expected to be $317.56 billion in 2021.

Given this backdrop, fundamentally sound apparel manufacturing stocks Levi Strauss & Co. (LEVI) and Kontoor Brands, Inc. (KTB) could be solid additions to your watchlist. Wall Street analysts expect them to rally by more than 45% in the near term.

Levi Strauss & Co. (LEVI)

LEVI operates as an apparel and related accessories company for men, women, and children across the United States, Europe, and Asia.  The company operates approximately 3,100 brand-dedicated stores and shop-in-shops.

On October 6, 2021, Harmit Singh, the company’s CFO, said, “Looking ahead, we are raising our outlook across revenues and profits. We have taken pricing actions and believe we have pricing power to mitigate inflationary pressures.”

LEVI’s net revenues came in at $1.50 billion for the fiscal third quarter ended August 29, 2021, up 40.9% year-over-year. The company’s net income was $193.33 million, up 614.8% year-over-year. Its EPS increased 571.4% year-over-year to $0.47. Moreover, its adjusted EBIT came in at $221.80 million, up 163.4% year-over-year.

For fiscal 2021, analysts expect LEVI’s revenue to be $5.76 billion, representing a 29.3% year-over-year rise. Also, the company’s EPS is expected to increase 585.7% year-over-year to $1.44 in the current year. It surpassed the EPS estimates in each of the trailing four quarters.

Over the past year, the stock has gained 26.3% to close yesterday’s trading session at $25.03. Wall Street analysts expect the stock to hit $37.25 in the near term, which indicates a potential upside of 48.8%.

LEVI’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, equating to a Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

Also, the stock has an A grade for Growth and Sentiment and a B grade for Momentum and Quality. It is ranked #3 in the Consumer Goods industry. Click here to see the additional POWR Ratings for Value and Stability for LEVI.

Kontoor Brands, Inc. (KTB)

KTB is a lifestyle apparel company engaged in designing, manufacturing, procuring, marketing, and distributing apparel under the Wrangler and Lee brands in the United States and internationally. It operates around 86 retail stores across the globe.

On November 4, 2021, Scott Baxter, President & CEO of KTB, said, “Kontoor is uniquely positioned to win in the marketplace, as evidenced by another quarter of broad-based strength across segments, channels and regions. And we expect our momentum to continue building, as reflected in our raised fiscal year guidance. Our strategic investments in key TSR-bolstering enablers such as digital, demand creation, and people should fuel our accelerating fundamentals.”

KTB’s net revenues increased 11.8% year-over-year to $652.3 million for the third quarter ended September 30, 2021. Its net income came in at $63.41 million, up 4.3% year-over-year. Also, its EPS came in at $1.07 compared to $1.05 in the year-ago period.

Analysts expect KTB’s revenue to grow 18.4% year-over-year to $2.48 billion in fiscal 2021. Likewise, its EPS is expected to grow 62.1% year-over-year in the current year to $4.23. It also surpassed the EPS estimates in each of the trailing four quarters.

Over the past year, the stock has gained 25.8% to close yesterday’s trading session at $51.62. Wall Street analysts expect the stock to hit $86 in the near term, which indicates a potential upside of 66.6%.

It’s no surprise that KTB has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has a B grade for Value, Momentum, and Quality. KTB is ranked #27 of 63 stocks in the A-Rated Fashion & Luxury industry. Click here to see the additional POWR Ratings for KTB (Growth, Stability, and Sentiment).

LEVI shares were trading at $25.18 per share on Thursday afternoon, up $0.15 (+0.60%). Year-to-date, LEVI has gained 26.67%, versus a 29.47% rise in the benchmark S&P 500 index during the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...

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