VFC VF Corporation

VF Corporation (VFC) carried its momentum into the first quarter of 2011 and delivered another solid quarter as revenues were up in each division.

Management raised its sales and EPS guidance off the strong quarter, prompting analysts to revise their estimates higher, sending the stock to a Zacks #2 Rank (Buy).

EPS is expected to grow by double-digits over the next two years, thanks in part to an acquisition.

Timberland Acquisition

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 will be adding the Timberland® (TBL) brand to its portfolio after it was recently announced that VF will buy the boot makers for approximately $2.2 billion.

VF is targeting 10% annual revenue growth for Timberland, which generates more than half of its sales internationally. VF also believes it can boost Timberland's profitability through expense management, supply chain capabilities and operating disciplines.

The deal is expected to close in the third quarter. The acquisition is expected to add 25 cents per share to VF's bottom line in 2011 and 75 cents in 2012, including acquisition costs.

First Quarter Results

VF Corporation reported stellar first quarter financial results on April 29. Earnings per share came in at $1.72, well ahead of the Zacks Consensus Estimate of $1.60. It was an 18% increase over the same quarter in 2010.

VF reported a 12% increase in first quarter revenues to $1.959 billion. Each division experienced revenue growth with the Outdoor & Action Sports segment (The North Face ® and Vans ®) leading the way with a 16% increase. Jeanswear was up 9% while Imagewear rose 12%.

International revenues were particularly strong, rising 20% year-over-year. Revenue in India was up 80%.

The gross margin expanded from 46.7% to a record 47.2% in the quarter, due in large part to a change in inventory accounting.

Guidance Raised

Management raised its revenue and EPS guidance for 2011 following the strong first quarter. The company now expects to earn $7.25 per share on 10% revenue growth, up from previous guidance of $7.00-$7.10 per share on revenue growth of 8-9%.

Analysts revised their estimates significantly higher as well, sending the stock to a Zacks #2 Rank (Buy). The 2011 Zacks Consensus Estimate is $7.33, representing 14% growth over 2010 EPS.

The 2012 consensus estimate is currently $8.09, corresponding with 10% EPS growth.

Fundamentals

VF Corporation pays a dividend that yields an attractive 2.4%. Over the last 10 years, the company has raised it at an average annual rate of 10.6%.

The valuation picture still looks reasonable. Shares trade at 14.2x forward earnings, in-line with the industry average. Its PEG ratio is 1.3 based on a 5-year growth rate of 10.9%.

VF Corporation is headquartered in Greensboro, North Carolina and has a market cap of $11.4 billion.

The Bottom Line

It looks like VF Corporation's strong portfolio of brands will get stronger later this year with the addition of Timberland.

Earnings estimates are on the upswing, and VF is expected to grow EPS by double-digit rates over the next two years. With a solid 2.4% dividend yield and reasonable valuation, VFC still looks pretty attractive.

Read the April 18 article here.

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Targa Resources Partners LP (NGLS) is an MLP operating in the natural gas liquids (NGL) industry. The partnership pays a distribution that yields a whopping 6.5%, and earnings are projected to grow a stellar 52% in 2011 and 13% in 2012. Consensus estimates have been rising over the last several weeks after the company posted strong first quarter results. Read the full article.

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

 
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