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V.F. Corporation (VFC - Analyst Report) reported fourth-quarter 2012 adjusted earnings of $3.07 per share, speeding ahead of the prior-year period earnings of $2.32 and Zacks Consensus Estimate of $3.03. The year-over-year increase was primarily driven a strong top-line growth along with improved margins.

Quarter in Detail

V.F. Corp.'s fourth-quarter revenue of $3.003 billion fell short of the Zacks Consensus Estimate of $3.072 billion. However, it grew 4% compared with the year-ago period, on the back of robust growth in Outdoor & Action Sports, international and direct-to-consumer revenues. However, the sale of John Varvatos in April 2012 had a 1% negative impact on revenues.

Gross margin in the quarter spiked 220 basis points to 47.4% from 45.2% in the comparable year-ago quarter, resulting from improvement in higher margin businesses along with lower product costs. Moreover, adjusted operating margin expanded 280 basis points to 15.1%, reflecting higher gross margin.

Segment Details

Revenue at Outdoor & Action Sports surged 6% from the year-ago quarter to $1.710 billion. Continued growth momentum at the company’s The North Face and Vans brands partially offset by weak performance at timberland brand contributed to the revenue growth. Segment operating income increased 18% year over year, while operating margin expanded 190 basis points to 18.8%.

Jeanswear revenue increased 3% to $734.8 million. The year-over-year 5% growth at the U.S., Latin and Central America and Asian businesses were partially offset by a decline in revenues in Europe. Moreover, the company witnessed significant growth in the segment’s operating income and margin, mainly on improved gross margin that came from lower product costs and improved operating efficiencies.

Imagewear revenue inched up 2% in the quarter to $262.1 million. Moreover, operating income and margin at the segment surged due to low product costs.

Revenue at Sportswear increased 15% to $182.7 million driven by increased Nautica and Kipling brands revenues. Segment operating income increased 70%, while operating margin expanded 580 basis points primarily due to robust revenue growth and operational efficiencies.

Contemporary Brands’ revenue slumped 17% to $106.9 million due to the sale of John Varvatos. However, operating income surged 20% during the quarter, while adjusted operating margin expanded 320 basis points on the back of increased direct-to-consumer business and lower closeout sales.

The company’s International revenues increased 7%. The growth was largely driven by strength across the biggest brands in America, Asia and Europe.

Direct-to-Consumer revenue increased 8%, driven by the addition of 41 new stores and a 15 percentage point growth contribution from Timberland. The company’s total owned retail stores were 1,129 at the end of 2012. Direct-to-consumer revenues reached 21% of VF’s 2012 total revenues.

Balance Sheet

V.F. Corp. ended the fiscal with cash and cash equivalents of $597.5 million and long-term debt of $1.429 million. The company’s shareholder equity came in at $5.126 billion at the end of 2012.

Dividend

The board of directors of this Zacks Rank #3 (Hold) company declared a quarterly cash dividend of 87 cents per share. Dividend will be paid on March 18, 2013 to shareholders of record as of March 8, 2013.

Looking into 2013

Given the solid 2012 results, the company expects 2013 revenue to increase 6% to $11.5 billion. Gross and operating margins are anticipated to expand by 100 basis points.

Based on above forecasts, V.F. Corp. expects its adjusted earnings for fiscal 2013 to be $10.70 per share.

The company projects its cash flow to touch a record of $1.4 billion.

Other Stocks to Consider

Apart from V.F. Corp., some of the company’s peers are also expected to report better-than-expected quarterly results in near term.

New York & Company Inc. (NWY - Snapshot Report) has an Earnings ESP of +12.50% and carries a Zacks Rank #2 (Buy).

Abercrombie & Fitch Company (ANF - Analyst Report) with an Earnings ESP of +1.04% and a Zacks Rank #2 (Buy).

True Religion Apparel Inc. with an Earnings ESP of +2.94% and a Zacks Rank #2 (Buy).

Our proven model shows that a company may beat the earnings if it has the right combination of two key components – Positive Earnings ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank #1, #2 and #3.

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