Greensboro, N.C.-based V.F. Corporation (VFC) remains on our Neutral list with a target price of $195.00. Moreover, the company carries a Zacks Rank #3 (Hold).
We are impressed with the company’s consistent positive earnings surprise trend, strong organic revenue growth and impressive management guidance. Nevertheless, there is anxiety due to sluggish economic recovery, slowdown in China as well as high household debt and unemployment level, which can constrain consumers’ spending.
The first-quarter 2013 earnings of $2.43 per share at V.F. Corporation marked a rise of over 25% from the comparable year-ago quarter and beat the Zacks Consensus Estimate of $2.17. The year-over-year increase was primarily driven by strong top-line growth along with improved margins.
From its earnings surprise history, we see that the company has beaten the Zacks Consensus Estimate in the past 14 quarters, with an average positive surprise of 10.4%.
Given the solid first-quarter results, the company raised its fiscal 2013 earnings projection to $10.75 per share from $10.70 forecasted earlier. Net sales for the fiscal will likely increase 6% to $11.5 billion. Gross and operating margins are expected to expand by 100 basis points (bps). Currently, the Zacks Consensus Estimate is $10.87 per share, which is substantially above the company’s guidance.
Apart from strong first-quarter results, V.F. Corp.’s growth prospects seem promising given the company’s sustained focus on strategic acquisitions along with expanding global operations.
On the flip side, the company operates in a competitive environment and strives to maintain its market share, actively contesting with numerous manufacturers and distributors of apparel and related products. V.F. Corp. 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 the company’s market share, consequently hurting its top and bottom-line performances.
Other Stocks Worth Considering
Better performing stocks in the apparel retail industry include Hanesbrands Inc. (HBI), Michael Kors Holdings Limited (KORS) and Joe’s Jeans Inc. (JOEZ). Hanesbrands and Michael Kors carry a Zacks Rank #1 (Strong Buy), while Joe’s Jeans has a Rank #2 (Buy).Read the Full Research Report on VFC
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