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Things You Need to Know Before V.F. Corp's (VFC) Q1 Earnings

Zacks Equity Research

V.F. Corporation VFC is slated to release first-quarter fiscal 2020 results on Jul 24, before the opening bell.

This designer, manufacturer and marketer of branded apparel and related products outpaced earnings estimates in the trailing four quarters, the average surprise being 16.4%.

The Zacks Consensus Estimate for earnings for the company in the quarter to be reported is pegged at 28 cents per share, which suggests a decline of 34.9% from the year-ago quarter. Estimates for the fiscal first quarter remained unchanged in the last 30 days. Moreover, the consensus mark for revenues stands at $2.2 billion, indicating a 20.2% decline from the year-ago quarter.

V.F. Corporation Price and EPS Surprise

 

V.F. Corporation Price and EPS Surprise

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

Factors at Play

V.F. Corp has been putting up a robust earnings show, backed by solid trends at its core brands (Vans and The North Face). Further, strong growth at international and direct-to-consumer businesses as well as Active, Outdoor and Work segments have been boosting results. The persistence of these trends is likely to aid top and bottom-line growth in the first quarter of fiscal 2020.

V.F. Corp’s Vans brand continues to display strength, with solid revenue growth across all regions, channels and product categories. The brand remains focused on icon management and overall concept, with robust growth in footwear and apparel categories. Further, management expects low double-digit revenue growth for the brand in fiscal 2020, keeping it on track to achieve its target of reaching $5 billion of revenues by 2023. With such growth lined up, the Vans brand is likely to contribute significantly to top-line growth in first-quarter fiscal 2020.

Moreover, the company’s upcoming quarterly results are poised to gain from the 2021 growth strategy, which focuses on business transformation and solid shareholder returns. Its focus on selling directly to consumers and investment in digital platforms along with robust international expansion plans should support sales growth in the to-be-reported quarter.

However, the company witnessed sluggish growth in the Jeans segment due to the increased popularity of athleisure apparel. This led to the spin-off of the Jeans business into a separate entity called Kontoor Brands. Though the spin-off is completed, this move weighed on the company’s margins in the fiscal fourth quarter. Notably, gross margin and adjusted operating margin included a 70-bps negative impact each from the spin-off. Continued spin-off related impacts may be a deterrent to the company’s margins in the to-be-reported quarter.

Additionally, V.F. Corp’s results continue to bear a meaningful impact of negative currency translations. The company’s international revenue guidance for fiscal 2020 includes the impact of negative currency translations. It anticipates international business to report revenue growth of about 4-6% in fiscal 2020, with an increase of 7-9% on a currency-neutral basis. Though management remained optimistic about its overall view for fiscal 2020, the forecasts were below analysts’ expectations.

A Look at the Zacks Model

Our proven model does not predict that V.F. Corp is likely to beat earnings estimates in the quarter to be reported. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The company currently has a Zacks Rank #5 (Strong Sell) and an Earnings ESP of 0.00%, which makes surprise prediction impossible. We caution against stocks with a Zacks Rank #4 (Sell) or 5 going into the earnings announcement, especially when the company is seeing negative estimate revisions.

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 in their respective quarterly results:

Skechers U.S.A., Inc. SKX has an Earnings ESP of +6.06% and a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Rent-A-Center, Inc. RCII currently has an Earnings ESP of +3.88% and a Zacks Rank of 2.

Prestige Consumer Healthcare Inc. PBH presently has an Earnings ESP of +1.56% and a Zacks Rank #2.

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