VFC VF Corporation

Estimates have been rising for VF Corporation (VFC) heading into its first quarter results on April 29. The company has delivered five consecutive positive earnings surprises, and management expects 2011 to mark the company's highest rate of organic revenue growth since 2007.

It is a Zacks #1 Rank (Strong Buy) stock.

VF Corporation designs, manufactures and markets lifestyle apparel under more than 30 brands, including Wrangler®, The North Face®, Lee®, Vans®, Nautica®, 7 For All Mankind® and Eagle Creek®.

The company also generates strong cash flows, which it has been using to return value to shareholders through stock buybacks and dividend increases.

Outlook

CEO Eric Wiseman recently stated that "2011 should mark the highest rate of organic revenue growth since 2007." The company expects an 8% to 9% increase in revenues in 2011 driven by 15% growth in international revenues and 10% to 15% revenue growth in its direct-to-consumer business. Earnings per share is expected to be between $7.00 and $7.10 per share.

The Zacks Consensus Estimate for 2011 is towards the upper end of this range at $7.09, representing a 10% increase over 2010 EPS.

Analysts are projecting more double-digit EPS growth in 2012. The consensus estimate is currently $7.89, equating to 11% growth.

The company reports its first quarter results on Friday, April 29.

Consensus estimates have been rising higher over the last several months as VFC has delivered five consecutive positive earnings surprises:

It is a Zacks #1 Rank (Strong Buy) stock.

Returning Value to Shareholders

VF Corporation generates strong cash flow which has allowed it to return value to shareholders through stock buybacks and dividend hikes and also pay down long-term debt.

In 2010, cash flow from operations reached an all-time high of $1 billion. From this, the company spent $412 million repurchasing 5.1 million shares, paid out $264 million in dividends, and also paid down $200 million of long-term debt.

Over the last 10 years, VFC has raised its dividend at an average annual rate of 10.6%, including a huge hike in 2006.

It currently yields an attractive 2.6%.

Fourth Quarter Results

VF Corporation reported its results for the fourth quarter on February 22. The company reported earnings per share of $1.78, beating the Zacks Consensus Estimate by 14 cents. It was a 10% increase over the same quarter in 2009.

Revenue rose 11% to $2.126 billion. This growth was driven primarily by a 20% increase in the Outdoor & Action Sports segment, which accounted for 42% of total revenue in the quarter. Jeanswear, which made up 32% of revenues, grew a steady 7%.

With all the fears over rising commodity prices hurting margins, VFC actually expanded its gross margin to a record 46.6%.

Valuation

Although shares have jumped more than 20% since late January, valuation is still reasonable for VFC. Shares are trading around 14.2x forward earnings, a slight discount to the industry average of 14.9x. Its PEG ratio is a respectable 1.3.

VF Corporation is headquartered in Greensboro, North Carolina and has a market cap of $10.9 billion.

Todd Bunton is the Growth & Income Stock Strategist for Zacks.com.

 
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