Earnings Preview: V. F. Corp - Analyst Blog
October 18 2012 - 1:25PM
Zacks
Based in Greensboro, North Carolina, V. F.
Corporation (VFC) – one of the world’s largest apparel
companies – is scheduled to release its third-quarter 2012
financial results on Monday, October 22, 2012. The current Zacks
Consensus Estimate for the quarter stands at $3.49 per share, an
increase of 21.5% from earnings of $2.87 reported in the year-ago
quarter.
We believe that the higher earnings expectations are due to the
company’s aggressive approach toward the expansion of its
international business, particularly in the Asia Pacific and
European regions. Moreover, V.F Corp.’s policy to acquire
businesses that provide strategic opportunities and exiting
businesses having lower potential has helped it drive growth and
improve profitability.
With respect to earnings surprises, V. F. Corp has topped the
Zacks Consensus Estimate over the last four quarters in the range
of 0.87% – 18.09%, with an average of 8.68%.
For fiscal 2012, the Zacks Consensus Estimate stands at $9.53
per share, which is higher than the earnings of $8.04 in 2011.
Second-Quarter 2012 Recap
V.F. Corp. reported second-quarter 2012 adjusted earnings of
$1.11 per share, speeding ahead of the Zacks Consensus Estimate of
94 cents. However, the result dipped 5% from adjusted earnings of
$1.17 per share earned in the comparable prior-year quarter.
The year-over-year decline was mainly due to a loss of 12 cents
at the Timberland operations as well as a combined 11 cents per
share impact from foreign currency translation and higher pension
expense.
V.F. Corp.'s second-quarter revenue of $2,141.8 million fell
short of the Zacks Consensus Estimate of $2,173 million. Revenues
grew 16% compared with the year-ago period, on the back of robust
growth in Outdoor & Action Sports and international
revenues.
Given the solid second-quarter results, the company raised its
earnings forecast for fiscal 2012 by 5 cents per share to $9.50 per
share, while it had earlier forecasted earnings of $9.45 per
share. However, the company retained the expected earnings
contribution from Timberland at $1.10 per share.
(For full report on earnings study: V.F. Corp's 2Q
Beats, Rev Misses)
Agreement of Estimate Revisions
For the to-be-reported quarter, 2 out of 18 analysts raised
their earnings estimates while only one lowered over the past 30
days. During the last 7 days earnings estimates have remained
almost unchanged with only one analyst lowering estimate for the
quarter.
Moreover, for fiscal 2012, over the last 30 days, only one
estimate has been revised in the upward direction while one
estimate was adjusted in the opposite direction. A similar trend
was also seen in the past 7 days.
Magnitude of Estimate Revisions
Due to more positive estimate revisions during the last 30 days,
the consensus estimate for the third quarter has been increased by
a penny to $3.49 per share. Further, for fiscal 2012, the consensus
estimates have been moved up by a penny to $9.53 per share, over
the last 7 days.
V. F. Corp Stays Neutral
We remain impressed with the company’s consistent positive
earnings surprise trend, strong organic revenue growth, as well as
the raised management guidance. However, stiff competition from
private label brands and currency fluctuation still remain the
causes of concern, thus keeping us on the sidelines.
As one of the world’s largest apparel companies with over 30
brands, V. F. Corp is well positioned to generate above-average
industry growth and sustain itself in the current challenging
environment.
However, skepticism still remains since the company derives
about 34% of its sales from international business, which exposes
it to risks of foreign laws and regulations that could negatively
affect operations, foreign consumer preferences, disruptions or
delays in shipments and currency fluctuations.
V. F. Corp, which faces stiff competition from well established
apparel industry players like Polo Ralph Lauren
Corp. (RL), Sears Holdings
Corp. (SHLD) and The Gap
Inc. (GPS), carries a Zacks #2 Rank, implying a
short-term Buy rating. However, we retain our long-term Neutral
recommendation on the stock.
GAP INC (GPS): Free Stock Analysis Report
RALPH LAUREN CP (RL): Free Stock Analysis Report
SEARS HLDG CP (SHLD): Free Stock Analysis Report
V F CORP (VFC): Free Stock Analysis Report
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