VF Corporation (VFC): Zacks Rank Buy

Zacks

VF Corporation (VFC) continues to deliver impressive results, and that is driving both earnings estimates and the stock price higher.

The company recently delivered its 10th consecutive positive earnings surprise on strong organic revenue growth. It is a Zacks #2 Rank (Buy).

While VF Corporation is expected to grow earnings per share at a double-digit pace over the next couple of years, the company also pays a dividend that yields a solid 1.9%.

Company Description

VF Corporation is a branded lifestyle apparel company with over 30 brands. Its top six brands are The North Face, Wrangler, Timberland, Vans, Lee and Nautica.

The company is headquartered in Greensboro, North Carolina and has a market cap of $17.1 billion.

First Quarter Results

VF Corporation delivered impressive first quarter results on April 27. Earnings per share came in at $1.94, beating the Zacks Consensus Estimate of $1.88. This was a 7% increase over the same quarter last year.

Revenue jumped 31% to $2.556 billion, ahead of the Zacks Consensus Estimate of $2.449 billion. This was aided in part by the Timerberland acquisition, but organic growth was still a remarkable 12%.

International revenues remained hot, with organic growth up 13% in Europe and 19% in Asia. Sales from overseas accounted for 40% of total revenue.

The gross profit margin did contract as expected, from 47.2% to 45.7% due to higher jeanswear product costs. But the operating margin still expanded, from 12.3% to 12.5%.

Estimates Rising

Following solid Q1 results, management raised its earnings guidance for the remainder of the year. The company now expects to earn around $9.45 per share on revenue growth of 15%, up from previous guidance of $9.30.

This prompted analysts to continue revising their estimates higher, sending the stock to a Zacks #2 Rank (Buy). As you can see below, consensus estimates have been steadily rising over the last several months as VF Corporation has delivered 10 consecutive positive earnings surprises:

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: Price & Consensus Chart

The Zacks Consensus Estimate for 2012 is now $9.48, slightly above guidance, and representing 18% growth over 2011 EPS. The 2013 consensus estimate is currently $10.91, corresponding with 15% growth.

Solid Dividend

Although most people will focus on the rapid growth at VF Corporation, don't overlook the company's solid 1.9% yield.

Since the year 2000, the company has increased its dividend at a compound annual rate of 10%.

Valuation

Shares of VFC have soared 55% since I first wrote about it on April 18 of last year. But the valuation picture still looks reasonable.

Shares trade at 15.7x 12-month forward earnings, a discount to the industry median of 17.4x. Its price to sales ratio of 1.8 is in-line with its peers.

The Bottom Line

With rising estimates, strong growth, a solid 1.9% yield and reasonable valuation, VF Corporation still offers a lot to like.

Read the October 28 article here.

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Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.

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