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Why Is V.F. Corp (VFC) Down 10.1% Since its Last Earnings Report?
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It has been about a month since the last earnings report for V.F. Corporation (VFC - Free Report) . Shares have lost about 10.1% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is VFC due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
V.F. Corp. Q4 Earnings & Revenues Lag
V.F. Corporation reported lower-than-expected fourth-quarter 2017 results, wherein both earnings and revenues lagged estimates. However, both top and bottom lines improved year over year. This marked the company’s top and bottom line miss after two consecutive quarters of beats. Further, the company provided guidance for the transitional quarter ending March 31, 2018.
Q4 Numbers
The company’s quarterly adjusted earnings from continuing operations came in at $1.01 a share, which jumped 13% year over year but missed the Zacks Consensus Estimate of $1.02. Earnings per share for the quarter included a 4 cents contribution from the Williamson-Dickie acquisition.
V.F. Corp. generated total revenues, including royalty income, of $3,649.3 million, that increased about 20% year over year but lagged the Zacks Consensus Estimate of $3,662 million. Net sales of $3,624.8 million also advanced 20% from the prior-year quarter, including contributions from the Williamson-Dickie acquisition. On a currency-neutral basis, revenues jumped 18%.
Excluding the Williamson-Dickie acquisition, revenues were up 12%, while currency-neutral revenues grew 10%, driven by continued strength in the company’s international and direct-to-customer platforms, Outdoor & Action Sports coalition and workwear businesses.
Adjusted gross margin increased 60 basis points (bps) to 51.6%, thanks to better pricing, lower restructuring expenses and a favorable mix-shift toward high margin businesses, which was partly negated by Williamson-Dickie acquisition and foreign currency headwinds. Excluding the aforementioned acquisition, adjusted gross margin expanded 140 bps to 52.4%. Notably, foreign currency hurt gross margin by 10 bps.
Adjusted operating income rose 6% to $497 million, while the adjusted operating margin contracted 180 bps to 13.6%. Excluding Williamson-Dickie, adjusted gross margin contracted 130 bps to 14.1%. Currency headwinds affected operating margin by 30 bps.
Segment Details
Revenues of Outdoor & Action Sports grew 16% to $2,500.2 million (up 13% on a currency-neutral basis).
Jeanswear revenues of $709.4 million rose 2% year over year (up 1% on a currency neutral basis).
Imagewear revenues rose 176% (176% on a currency-neutral basis) to roughly $406.4 million.
Other revenues dropped 1% to $33.3 million on both reported and currency-neutral basis.
Financial Details
V.F. Corp. ended 2017 with cash and cash equivalents of $566.1 million, long-term debt of $2,187.8 million and shareholders’ equity of $3,791.9 million. In 2017, the company generated $1,474.7 million cash from operating activities.
Concurrently, the company declared a quarterly dividend of 46 cents per share, which is payable on Mar 19, to shareholders with record as on Mar 9.
Divestitures
During the fourth quarter, the company decided upon selling its Nautica brand business. Earlier, the company completed the sale of its Licensed Sports Group business including the Majestic brand, to Fanatics, Inc. on Apr 28, 2017.
Also, management implemented its plan of discontinuing its licensing unit, which led the company to bring assets of its JanSport brand under the “held-for-sale” category. In August 2016, the company completed the sale of its Contemporary Brands businesses including the 7 For All Mankind, Splendid and Ella Moss brands.
All these businesses are classified as discontinued operations in the company’s financial statements.
Outlook
As previously announced, the company has decided to change its fiscal year-end to the Saturday closest to Mar 31 from the current Saturday closest to Dec 31. This change will be effective from Mar 31, 2018. Consequently, the company provided guidance for the transitional quarter ending Mar 31, 2018.
V.F. Corp. expects revenues of nearly $2.9 billion, an increase of 16%. This includes a $200 million contribution from the Williamson-Dickie acquisition. Excluding the Williamson-Dickie acquisition, revenues are likely to increase at a high single-digit rate.
The company envisions adjusted earnings per share for the transitional quarter to be around 65 cents, marking 27% growth, including a 2 cents contribution from the aforementioned acquisition. Excluding the effects of this acquisition, adjusted earnings per share is estimated to jump more than 20%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been four revisions higher for the current quarter.
At this time, VFC has a great Growth Score of A, though it is lagging a lot on the momentum front with a C. Following the exact same course, the stock was also allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for growth investors than those looking for value and momentum.
Outlook
Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. Interestingly, VFC has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is V.F. Corp (VFC) Down 10.1% Since its Last Earnings Report?
It has been about a month since the last earnings report for V.F. Corporation (VFC - Free Report) . Shares have lost about 10.1% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is VFC due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
V.F. Corp. Q4 Earnings & Revenues Lag
V.F. Corporation reported lower-than-expected fourth-quarter 2017 results, wherein both earnings and revenues lagged estimates. However, both top and bottom lines improved year over year. This marked the company’s top and bottom line miss after two consecutive quarters of beats. Further, the company provided guidance for the transitional quarter ending March 31, 2018.
Q4 Numbers
The company’s quarterly adjusted earnings from continuing operations came in at $1.01 a share, which jumped 13% year over year but missed the Zacks Consensus Estimate of $1.02. Earnings per share for the quarter included a 4 cents contribution from the Williamson-Dickie acquisition.
V.F. Corp. generated total revenues, including royalty income, of $3,649.3 million, that increased about 20% year over year but lagged the Zacks Consensus Estimate of $3,662 million. Net sales of $3,624.8 million also advanced 20% from the prior-year quarter, including contributions from the Williamson-Dickie acquisition. On a currency-neutral basis, revenues jumped 18%.
Excluding the Williamson-Dickie acquisition, revenues were up 12%, while currency-neutral revenues grew 10%, driven by continued strength in the company’s international and direct-to-customer platforms, Outdoor & Action Sports coalition and workwear businesses.
Adjusted gross margin increased 60 basis points (bps) to 51.6%, thanks to better pricing, lower restructuring expenses and a favorable mix-shift toward high margin businesses, which was partly negated by Williamson-Dickie acquisition and foreign currency headwinds. Excluding the aforementioned acquisition, adjusted gross margin expanded 140 bps to 52.4%. Notably, foreign currency hurt gross margin by 10 bps.
Adjusted operating income rose 6% to $497 million, while the adjusted operating margin contracted 180 bps to 13.6%. Excluding Williamson-Dickie, adjusted gross margin contracted 130 bps to 14.1%. Currency headwinds affected operating margin by 30 bps.
Segment Details
Revenues of Outdoor & Action Sports grew 16% to $2,500.2 million (up 13% on a currency-neutral basis).
Jeanswear revenues of $709.4 million rose 2% year over year (up 1% on a currency neutral basis).
Imagewear revenues rose 176% (176% on a currency-neutral basis) to roughly $406.4 million.
Other revenues dropped 1% to $33.3 million on both reported and currency-neutral basis.
Financial Details
V.F. Corp. ended 2017 with cash and cash equivalents of $566.1 million, long-term debt of $2,187.8 million and shareholders’ equity of $3,791.9 million. In 2017, the company generated $1,474.7 million cash from operating activities.
Concurrently, the company declared a quarterly dividend of 46 cents per share, which is payable on Mar 19, to shareholders with record as on Mar 9.
Divestitures
During the fourth quarter, the company decided upon selling its Nautica brand business. Earlier, the company completed the sale of its Licensed Sports Group business including the Majestic brand, to Fanatics, Inc. on Apr 28, 2017.
Also, management implemented its plan of discontinuing its licensing unit, which led the company to bring assets of its JanSport brand under the “held-for-sale” category. In August 2016, the company completed the sale of its Contemporary Brands businesses including the 7 For All Mankind, Splendid and Ella Moss brands.
All these businesses are classified as discontinued operations in the company’s financial statements.
Outlook
As previously announced, the company has decided to change its fiscal year-end to the Saturday closest to Mar 31 from the current Saturday closest to Dec 31. This change will be effective from Mar 31, 2018. Consequently, the company provided guidance for the transitional quarter ending Mar 31, 2018.
V.F. Corp. expects revenues of nearly $2.9 billion, an increase of 16%. This includes a $200 million contribution from the Williamson-Dickie acquisition. Excluding the Williamson-Dickie acquisition, revenues are likely to increase at a high single-digit rate.
The company envisions adjusted earnings per share for the transitional quarter to be around 65 cents, marking 27% growth, including a 2 cents contribution from the aforementioned acquisition. Excluding the effects of this acquisition, adjusted earnings per share is estimated to jump more than 20%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been four revisions higher for the current quarter.
V.F. Corporation Price and Consensus
V.F. Corporation Price and Consensus | V.F. Corporation Quote
VGM Scores
At this time, VFC has a great Growth Score of A, though it is lagging a lot on the momentum front with a C. Following the exact same course, the stock was also allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for growth investors than those looking for value and momentum.
Outlook
Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. Interestingly, VFC has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.