Shares of VF (VFC) remained flat after the company reported Q3 results and lifted its outlook for 2014. VF has been one of my top clothing picks for some time, but is this lackluster a response a sign of worse times to come?
Company Overview
With over $11 billion in annual sales, VF is the world’s largest apparel company, and it’s easy to see why. VF is responsible for at least 30 major brands, including Lee, Wrangler, the North Face, Timberland and Vans.
VF’s largest and fastest-growing business is its outdoor and action sports segment, which accounts for half of global revenues. In addition, VF also runs sportswear, contemporary brands, jeanswear and imagewear businesses. VF employs 59,000 worldwide and its products are sold in more than 150 countries.
Earnings Rundown
VF announced that it earned $470.5 million, or $1.08 per share, on $3.52 billion in net sales in the third quarter. Compared with Q3 2013 this represents 8.5% earnings growth and 6.7% sales growth. Analysts were looking for $1.09 earnings-per-share on $3.57 billion in revenue. So, VF missed sales and earnings estimates by a hair. Still, VF is looking good for the long haul.
Looking ahead to fiscal 2014, VF boosted its earnings outlook to $3.08 per share, up from $3.06 EPS earlier. VF also estimates 8% revenue growth ($12.3 billion). The analyst community is calling for $3.10 EPS on $12.34 billion in revenue.
This earnings report follows last week’s 22% dividend hike. Last Thursday, VF’s board of directors declared a quarterly dividend of $0.32 per share. Shareholders of record on Dec. 9 will be paid on Dec. 19. At current prices, VF pays a 2% dividend yield.
Current Ratings
For the past 12 months running, VFC has held up at a “buy” rating. That’s because VFC is strong both in terms of institutional buying pressure (as shown by its “A” Quantitative Grade) and solid fundamentals (“B” Fundamental Grade).
When it comes to VF’s financial health, it scores highly on earnings growth (B), cash flow (B) and return on equity (A). Meanwhile, VF has room for improvement on sales growth, operating margin growth, earnings momentum, earnings surprises and analyst earnings revisions (all of which are “C-rated”).
VFC is a “B-rated buy.” While the Q3 sales and earnings miss didn’t impress investors, VF stock is still a good long-term position.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
