Shares of V.F. Corporation (VFC - Analyst Report) touched a new 52-week high of $63.99 on Tuesday, May 13, 2014 and eventually closed trade at $63.54. The stock has been gaining momentum since reporting upbeat earnings results for the first quarter of 2014 last month. Moreover, this global apparel retailer has amassed a year-over-year return of 37.6%. Average volume of shares traded over the last 3 months was approximately 2.3 million.
The upsurge in the stock price also reflects the company’s positive earnings momentum. We have observed that V.F. Corp. has beaten the Zacks Consensus Estimate in 17 of the past 18 quarters, registering an average positive surprise of 8.9%. In the last concluded quarter, earnings per share outdid the Zacks Consensus Estimate by 4.7%. The company also provided an impressive guidance for fiscal 2014.
Adjusted earnings of 67 cents per share surged 12% year over year and came in ahead of the Zacks Consensus Estimate of 64 cents per share. Results mainly benefited from a sustained performance from the company’s Outdoor & Action Sports business of brands such as The North Face, Vans and Timberland. Additionally, gross margin improvement in every segment boosted earnings.
V.F. Corp.'s total revenue of $2,780.8 million grew nearly 6.5% year over year on the back of double-digit revenue growth at its Outdoor & Action Sports, international as well as direct-to-consumer businesses. Moreover, reported sales surpassed the Zacks Consensus Estimate of $2,765 million.
Furthermore, the company seems confident about 2014, mainly on the back of its strong brand portfolio. For 2014, it envisions delivering results at the high end of its previously stated guidance of a 7–8% increase in revenues, considering favorable growth in all its coalitions. For the second quarter, the company expects revenue growth to be similar to the first-quarter level, driven by continued strength at the Outdoor & Action Sports coalition.
Based on the marginally higher-than-expected earnings results for the first quarter, the company now projects adjusted earnings for 2014 to rise 13% year over year to $3.06 per share. Previously, the company had projected earnings in the band of $3.00–$3.05 per share, representing 11–13% growth.
Looking at the company’s valuation we note that the stock is expensive, trading at a forward price-earnings ratio (P/E) of 20.6x, a 19.8% premium to the peer group average of 17.2x. However, the Zacks Rank #2 (Buy) company’s long-term estimated earnings per share growth rate of 13.5% is higher than the peer group growth rate of 12.8%, which justifies its lofty valuation. Also, the last traded price is nearly 6.2% below the Zacks Consensus average analyst price target of $67.73, which indicates that there is sufficient upside potential for the stock.
Apart from V.F. Corp., other retail stocks such as Rite Aid Corp. (RAD - Analyst Report), Foot Locker Inc. (FL - Snapshot Report) and Dillard’s Inc. (DDS - Analyst Report) achieved new 52-week highs of $8.02, $49.63 and $100.63, respectively, on May 13, 2014.