V. F. Corp. - Growth & Income
December 18 2012 - 7:00PM
Zacks
V. F. Corporation (VFC) has put together 12 straight
quarters with positive earnings surprises and 40 consecutive years
with an annual dividend increase. In late October, this Zacks #2
Rank (Buy) apparel and footwear company raised its earnings outlook
for the full year after a strong third-quarter performance. Given
all these factors, VFC seems to be an attractive pick for investors
seeking growth and income.
Third Quarter Beat
On October 22, V.F. Corp. reported third-quarter earnings of
$3.52 per share, inching past the Zacks Consensus Estimate of $3.49
and handily beating the year-ago performance by nearly 23%. The
year-over-year increase was primarily driven by strong top-line
growth along with improved margins.
Revenue of $3,119.6 million fell short of the Zacks Consensus
Estimate at $3,172 million, but gained 14% year-over-year. VFC
experienced robust revenue growth in Outdoor & Action Sports,
international and direct-to-consumer revenues, but the sale of John
Varvatos in April 2012 had a slightly negative impact.
Segment-wise, revenue at the company’s Outdoor & Action
Sports jumped 29%, Imagewear climbed 3%, Sportswear was up 2%,
International grew 28% and Direct-to-consumer increased 28%.
Revenue at Jeanswear fell 1% and Contemporary Brands slumped
17%.
Gross margin in the quarter spiked 140 basis points to 46.7%
from 45.3% in the year-ago quarter, due to improvement in higher
margin businesses. Moreover, adjusted operating margin rose 90
basis points to 17.5%, reflecting higher gross margin.
Given the solid third-quarter results, the company raised its
earnings forecast for fiscal 2012 by 10 cents per share to $9.60
per share. The company maintained its revenue projection for an
increase of approximately 15% year over year to $10.9 billion.
The company also provided its outlook for the fourth quarter,
forecasting revenue growth of 7% year over year on a constant
currency basis. Adjusted earnings are anticipated to be up more
than 30% from the year-ago quarter.
Earnings Forecast on the Rise
In the last 60 days, the Zacks Consensus Estimate for 2012 moved
up 0.7% to $9.60, as 17 of 18 estimates were revised upward. The
Zacks Consensus Estimate for 2013 is currently $10.97. These
estimates represent year-over-year growth of 19.4% for 2012 and
14.2% for 2013.
Strong Dividend
V. F. Corp. has been consistently raising its dividend every
year for the past 40 years. In October, the company announced a 21%
increase in its quarterly dividend, which now stands at 87 cents
per share. This brings the company’s annualized dividend to $3.48
per share.
This dividend, which will be paid on December 20, currently
yields about 2.3%. The company has a payout ratio of 32%, while its
5-year annual dividend growth rate stands at 3.2%.
Valuation
Valuation looks reasonable for this apparel retailer with shares
trading at 15.7x 12-month forward earnings, on par with its peer
group average. However, on a price-to-book basis, shares are
currently trading at 3.4x, a 9.7% premium to the peer group average
of 3.1x.
Nevertheless, the stock looks attractive, given a trailing
12-month ROE of 21.6%, which is higher than the peer group average
of 18.2%. The company’s long-term estimated earnings per share
growth rate also remains strong at 12.0%.
The stock price is now mirroring the increasing trend of
consensus estimates. The year-to-date return for the stock is
16.5%. Volume is averaging roughly 655K daily.
We remain impressed with V.F. Corp’s consistent positive
earnings surprise trend, strong organic revenue growth and the
raised management guidance. Furthermore, the company’s sustained
focus on strategic acquisitions along with expanding global
operations provide ample opportunity to boost the top and bottom
lines. The company’s focus on broadening its business globally is
evident from its recently announced expansion plans for Asia
Pacific, one of the fastest growing regions in the world. The
company targets Asia-Pacific sales at $2 billion by 2017.
Founded in 1899 and based in Greensboro, North Carolina, V.F.
Corporation is one of the world’s largest apparel companies with
more than 30 brands. The company primarily generates its revenue
from jeanswear, outdoor, imagewear, contemporary brand and
sportswear divisions. The company sells its products through
specialty stores, department stores, national chains, and mass
merchants, along with licensees and distributors. It has a market
cap of $16.7 billion.
Want More of Our Best Recommendations?
Zacks' Executive VP, Steve Reitmeister, knows when key trades
are about to be triggered and which of our experts has the hottest
hand. Then each week he hand-selects the most compelling trades and
serves them up to you in a new program called Zacks
Confidential.
Learn More>>
V F CORP (VFC): Free Stock Analysis Report
V F CORP (VFC): Free Stock Analysis Report
To read this article on Zacks.com click here.
VF (NYSE:VFC)
Historical Stock Chart
From Jun 2024 to Jul 2024
VF (NYSE:VFC)
Historical Stock Chart
From Jul 2023 to Jul 2024