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Will V. F. Corp's (VFC) Brand Strength Aid Q2 Earnings?

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V.F. Corporation (VFC - Free Report) is slated to release results for second-quarter fiscal 2019 on Oct 19, before the market opens.

In the last-reported quarter, this designer, manufacturer, and marketer of branded apparel and related products delivered a positive earnings surprise of 34.4%. This marked the company’s fourth top- and bottom-line beat in the last five quarters. It recorded an average positive surprise of 11.6% in the last four quarters.

What to Expect?

The question lingering on investors’ minds is whether V.F. Corp will be able to deliver positive earnings surprise in the quarter to be reported. The Zacks Consensus Estimate for the quarter under review is $1.32 per share, reflecting year-over-year growth of 7.3%.

V.F. Corporation Price, Consensus and EPS Surprise

 

V.F. Corporation Price, Consensus and EPS Surprise | V.F. Corporation Quote

We note that the Zacks Consensus Estimate remained unchanged ahead of the earnings release. The Zacks consensus revenues estimate of $3.9 billion reflects an increase of 10.1% from the year-ago quarter.

Moreover, we note that the stock has outperformed the industry in the past year. Its shares have increased 33.8% while the industry recorded 27% growth.

 



Factors at Play

V.F. Corp is gaining from its progress on the 2021 growth strategy, which focuses on responding to the changing marketplace while targeting shareholder returns. The company’s focus on this plan is evident from growth in direct-to-consumer and digital businesses, as well as the international segment.

Additionally, the company is gaining from strength in Active and Work segments. Moreover, V.F. Corp’s acquisition strategy appears to be aiding the company. Notably, first-quarter fiscal 2019 results gained from solid growth for the core brands (Vans and The North Face) and contributions from acquisitions.

Evidently, the company’s big three brands improved at a combined rate of 21%, led by 35% growth at Vans and 8% growth at The North Face. Driven by the robust performance, it raised earnings and sales view for fiscal 2019. V.F. Corp now expects revenues of $13.6-$13.7 billion, marking an increase of 10-11%. Further, it envisions adjusted earnings per share of $3.52-$3.57, representing growth of 12-14% year over year.

However, performance of the company’s wholesale business and Jeans segment continues to remain soft. Moving to a more digital-driven business, V.F. Corp is slowly eliminating sales to middlemen — including department stores and off-price retailers — which are exposed to risks of bankruptcy and store closures. This has been hurting revenue contribution from the wholesale business.

The company is establishing tie-ups with digital wholesale partners to sell The North Face brand, which should boost wholesale revenues. However, we expect brick-and-mortar wholesale in the United States to remain challenged as the company’s strategy suggests that most of its wholesale sales will come from outside the country.

Additionally, V.F. Corp’s international business, which constitutes a major part of sales, remains exposed to currency fluctuations. A strengthening greenback may reduce the company’s profitability. Notably, V.F. Corp lowered its international revenue guidance for fiscal 2019 to mainly reflect the impact of negative currency translations. It now anticipates international business to report revenue growth of about 12-13% from growth of 13-15% stated earlier.

What the Zacks Model Unveils

Our proven model shows that V.F. Corp is likely to beat earnings estimates this quarter. 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 has a Zacks Rank #2 and an Earnings ESP of 1.87%, which makes earnings surprise prediction conclusive.

Other Stocks Poised to Beat Earnings Estimates

Here are some other companies that you may want to consider as our model shows that these too have the right combination to deliver an earnings beat:

Callaway Golf Company (ELY - Free Report) has an Earnings ESP of +221.42% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

eBay Inc. (EBAY - Free Report) has an Earnings ESP of +0.91% and a Zacks Rank #2.

Snap-On Incorporated (SNA - Free Report) has an Earnings ESP of +0.67% and a Zacks Rank #2.

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