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Gildan Activewear Inc. (NYSE:GIL) reported a sharp increase in fourth quarter earnings, but the results disappointed some analysts and investors. The t-shirt and sock maker’s shares were down roughly 4.5% at 10:30 a.m. ET on Friday.

RBC Capital Markets analyst Sara O’Brien expected the pullback and said it creates a buying opportunity given Gildan’s solid outlook for 2008.

In fiscal 2008, she expects gross margin improvements will drive earnings per share (NYSEARCA:EPS) growth of roughly 60%. For the long-term, she thinks Gildan will use its strong balance sheet and cash flow for acquisitions that will produce above-average EPS growth.

Ms. O’Brien recommends investors buy Gildan, and has an “outperform” rating and $46 price target on the stock.

Raymond James analyst Andy Nasr, who rates Gildan a “strong buy” and hiked his price target by C$5 to C$50, said the weaker-than-expected results were due to higher incentives paid to distributors, Gildan’s failure to capitalize on market demand for things like golf shirts, and an unfavorable higher deferred tax liability that resulted from the strong Canadian dollar.

“The company continues to boast sound defensive characteristics, little debt, no fashion risk, and a proven management team,” he said in a note.

Source: Despite Disappointing Earnings, Analysts Still Bullish on Gildan