VFC Shares Hit High on 5-Year Growth Plan

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Shares of V.F. Corporation (VFC) reached a new 52-week high of $189.85 on Jun 12, 2013, following the company’s recent announcement of 5-year initiatives and strategies to boost shareholder returns.

This global apparel retailer eventually closed trade at $189.58 on the above-mentioned date, recording a year-to-date return of 27.4%. Average volume of shares traded over the last 3 months stands at approximately 533K. Moreover, the company currently trades at a forward P/E of 17.4x, a 4.6% discount to the industry average of 18.3x.

Investors’ became more optimistic about this Zacks Rank #3 (Hold) stock, after the company  outlined its key financial targets for 2017 at an investor meet held on Jun 11, that are expected to drive strong cash flow, and consequently fund acquisitions, dividends and share repurchases.

As part of its key financial targets, V.F. Corporation, expects to increase revenues to $17.3 billion by 2017, recording a 5-year compounded annual growth rate (CAGR) of 10%, including 8% organic growth and 2% growth from acquisitions. Earnings per share through 2017 are targeted to reach $18.00, reflecting a 5-year CAGR of 13%.

The company now expects gross margin to jump 300 basis points to 49.5% in 2017 from 46.5% in 2012. Operating margin for 2017 is expected to grow to 16%, expanding 250 basis points from 13.5% in 2012.

This growth in the company’s margins will likely drive annual cash flow from operations to $2.4 billion by 2017, with a cumulative cash flow generation of $9.5 billion from 2013 to 2017. Based on such strong cash flow projections, the company expects a dividend payout rate of 40%, annual total shareholder return of more than 15% and return on invested capital of 20% by 2017.

What further bolsters investors’ confidence on the stock is the company’s track record of positive earnings surprise history.  We observe that V.F. Corporation has beaten the Zacks Consensus Estimate in the past 14 quarters by an average of 10.5%.

V.F. Corp.'s diversified brand portfolio and its brand management – with the focus on developing its brands further – position the company more advantageously than its peers. Given the strength of many of its brands and the opportunities in distribution, we believe that the company is poised for significant long-term growth.

Apart from V.F. Corp., companies such as Hewlett-Packard Company (HPQ), Oasis Petroleum Inc (OAS) and Magna International Inc. (MGA) achieved new 52-week highs of $25.49, $41.61 and $69.06, respectively, on Jun 12, 2013.

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