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Factors Setting the Tone for V.F. Corp's (VFC) Q2 Earnings

Zacks Equity Research

V.F. Corporation VFC is slated to release second-quarter fiscal 2020 results on Oct 25, before the opening bell. Notably, the company’s earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 9.6%. Let’s see how things are shaping up for the lifestyle apparel designer’s upcoming quarterly release.

Factors at Play

V.F. Corp has been gaining from strong core brands (Vans and The North Face). In fact, the Vans brand continues to display strength, with solid revenue growth across all regions, channels and product categories. Further, robust growth at international and direct-to-consumer businesses as well as Active, Outdoor and Work segments have been aiding results for a while. Persistence of these trends is expected to have contributed to the company’s top and bottom lines in second-quarter fiscal 2020.

Moreover, its consistent efforts to become a more consumer-based and retail-centric company are likely to have aided fiscal second-quarter results. Its focus on selling directly to consumers and investment in digital platforms along with robust international expansion strategy is likely to be reflected in its performance for the quarter to be reported.

However, the spin-off of the company’s Jeans business into a new company, Kontoor Brands Inc, concluded in the first quarter of fiscal 2020, is likely to have affected fiscal second-quarter performance. The absence of the revenue contribution from the category is likely to get reflected in V.F. Corp’s fiscal second-quarter top-line number. We note that the Jeans business registered $632.9 million in the second quarter of fiscal 2019, contributing roughly 16.2% to the company’s total revenues.

In addition, V.F. Corp’s margins might have been affected by higher costs of investments toward brand development and technology enhancements. In the last reported quarter, SG&A expenses rose as robust operating leverage was offset by 11% rise in investments toward long-term strategy.

The Zacks Consensus Estimate for V.F. Corp's fiscal second-quarter earnings is currently pegged at $1.30, which indicates a decline of about 9.1% from the year-ago quarter’s reported number. For quarterly revenues, the consensus mark is pinned at $3,415 million, which suggests a year-over-over decline of more than 12%.

Apart from these factors, macroeconomic challenges and currency headwinds, owing to its vast international presence, might have affected the company’s performance in the fiscal second quarter.

A Look at the Zacks Model

Our proven model does not conclusively predict an earnings beat for V.F. Corp this reporting cycle. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

V.F. Corporation Price and EPS Surprise

 

V.F. Corporation Price and EPS Surprise

V.F. Corporation price-eps-surprise | V.F. Corporation Quote

Although V.F. Corp currently carries a Zacks Rank #3, its Earnings ESP of 0.00% makes surprise prediction difficult.

Stocks Poised to Beat Earnings Estimates

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to deliver an earnings beat:

Hasbro, Inc HAS has an Earnings ESP of +1.44%. It sports a Zacks Rank #1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Activision Blizzard, Inc ATVI has an Earnings ESP of +22.64% and a Zacks Rank of 2.

Gildan Activewear Inc GIL has an Earnings ESP of +0.87% and a Zacks Rank #3.

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