VFC VF Corporation

Greensboro, N.C.-based V.F. Corporation (VFC) – one of the largest apparel retailers in the world – remains on our Neutral list with a target price of $169.00. Moreover, the company has a Zacks Rank #3 (Hold).

Why Reiterate?

At one end where we remain impressed with the company’s consistent positive earnings surprise trend, strong organic revenue growth and impressive management guidance, at other end we remain cautious on the stock due to sluggish economic recovery, slowdown in China as well as high household debt and unemployment level, which may restrain consumers’ spending.

The fourth quarter 2012 earnings of $3.07 per share at V.F. Corp. exhibited an improvement of over 32% from the comparable year-ago quarter as well as the Zacks Consensus Estimate of $3.03. The year-over-year increase was primarily driven a strong top-line growth along with improved margins.

Looking at the earnings surprise history, the company has beaten the Zacks Consensus Estimates in the past 13 quarters. The average positive surprise in the trailing 13 quarters comes to 10.3%.

Given the solid fourth-quarter results, the company expects 2013 revenue to increase 6% to $11.5 billion. Gross and operating margins are anticipated to expand by 100 basis points. Based on these forecasts, V.F. Corp. expects its adjusted earnings for 2013 to be $10.70 per share compared with $9.63 in 2012. Currently, the Zacks Consensus Estimate stands at $10.81 per share, which is substantially above the company’s guidance.

Apart from strong fourth-quarter results, V.F. Corp.’s growth story looks compelling. We believe that the company’s sustained focus on strategic acquisitions, along with expanding global operations, bodes well for future growth.

On the flip side, the company operates in a competitive environment and strives to maintain its market share, actively competing with numerous manufacturers and distributors of apparel and related products. The company primarily competes on the basis of brand recognition, fashion, price, service, store location, and quality. Failure to offer high-quality differentiated products at a competitive price may hamper V.F. Corp.’s market share, and thereby it’s top and bottom line performances.

Other Stocks Worth Considering

Other stocks worth considering in the apparel retail industry are Guess’ Inc. (GES), Michael Kors Holdings Limited (KORS) and Ralph Lauren Corporation (RL). Guess and Michael Kors hold a Zacks Rank #1 (Strong Buy), while Ralph Lauren carries a Rank #2 (Buy).

 
GUESS INC (GES): Free Stock Analysis Report
 
MICHAEL KORS (KORS): Free Stock Analysis Report
 
RALPH LAUREN CP (RL): Free Stock Analysis Report
 
V F CORP (VFC): Free Stock Analysis Report
 
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