VF Tops 2Q Estimates; Shares Decline

Shares of VF Corp. dropped 2.5% on Friday after 2Q earnings and revenues declined 44.2% and 18%, respectively, on a year-over-year basis, due to store closures and lower consumer demand amid the COVID-19 outbreak. However, 2Q adjusted EPS of $0.67 per share still came in ahead of analysts’ expectations of $0.48. The apparel and footwear retailer’s revenues of $2.61 billion also beat the Street consensus of $2.49 billion.

Looking ahead, the company’s FY21 outlook exceeded analysts’ estimates, even though the projection reflects a continued drop in revenues and EPS. (See VFC stock analysis on TipRanks).

VF Corp (VFC) expects FY21 sales of at least $9 billion, compared to analysts’ estimates of $8.8 billion. Further, the company expects its adjusted EPS to be at least $1.20 in FY21, exceeding the Street consensus of $1.11. FY21 sales and EPS guidance reflect a decline of approximately 14% and 55%, respectively, on a year-over-year basis.

Susquehanna analyst Sam Poser raised the stock’s price target to $90 (18.7% upside potential) from $81 and maintained a Buy rating. The analyst said “While the next six months are likely to be choppy, we believe VFC is well positioned to return to its long-term top & bottom line growth algorithm (on a normalized basis) as soon as FY22 driven by: 1) operational discipline; 2) a strong portfolio of brands; 3) robust digital infrastructure; and 4) a resilient balance sheet.”

Poser added that “despite the challenging environment, overall business is improving faster than anticipated, reflected by 2Q21’s top & bottom line beat.” He also believes that “FY21 guidance, provided for the first time since the onset of the pandemic, is prudent, but will prove conservative.” Further, the quarterly dividend hike of 2% to $0.49 per share “reflects management’s confidence in the trajectory of the business.”

Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 8 Buys and 6 Holds. The average price target of $77.14 implies upside potential of about 1.7% to current levels. Shares have declined by 23.9% year-to-date.